Consultation on assessing andaddressing the market impact of
MSCI Index Reviews
August 2020

© 2020 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

Background➢ Continued growth in index linked product AUM and index based investing over the last
decade have led MSCI to conduct a focused examination around potential index methodology
changes that may better address the overall market impact of Index Reviews➢ MSCI opens a consultation around the following proposals which can potentially ease
replication and related index review implementation challenges:▪

‘Staggering’ the implementation of all Semi-Annual (SAIR) and Quarterly Index Reviews(QIR) for both Global Investable Market Indexes (GIMI) and Non-Market Cap Weighted
Indexes▪

Switch a Semi-Annual Index Review to a “light” rebalancing scenario under conditions ofmarket stress as introduced by the MSCI Market Monitoring Framework*➢ MSCI may additionally launch a subsequent consultation on selected technical aspects of the
topics covered herein➢ MSCI welcomes feedback from the investment community on these topics until December 15,
2020. MSCI will announce the results of this consultation on or before January 31, 2021

*The MSCI Market Monitoring Framework aims to continually assess the potential impact of market
conditions on regular Index Reviews along three key dimensions: Market Functioning, Market Liquidity
and Data Availability.

2

Proposal SummaryMarket Conditions

Proposal/Recommendation▪ Increased market impact due the AUM growth‘Normal’❑ Employ a staggered
implementation* of rebalancing
for GIMI and Non-Market cap
weighted Indexes to easepotential market impact aroundindex review implementation❑ Additionally opt for a “light” (QIR)
rebalancing to replace a SAIR intimes of extreme market volatility
to reduce the rebalancing impact▪ Material increase in market impact (bid/offer size)
and transaction costs‘Market Stress’

Rationale▪ Significant growth in Daily Traded Values on IR
implementation dates▪ Efficient way to manage the size of the IR ‘trade’▪ Market participant feedback▪ Potential increase in migrations due to extreme
volatility*A staggered implementation refers to an Index Review that will be implemented over a
period of time leading into the effective date (i.e. approximately 33% of overall ‘trade’ each day for 3
days)
3

Index Review Implementation
under Normal Market Conditions
Proposal© 2020 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

Proposal: Staggered Implementation as a More Efficient
Way to Manage the Index Review➢In addition to the substantial growth in index linked product AUM and index
based investing already noted, we have also observed significant growth in
Daily Traded Values on Index Review implementation dates (T-1)➢Based on historical analysis, using a ‘staggered’ implementation approach
may have been beneficial in managing overall transaction costs➢ MSCI proposes to implement a staggered approach across theimplementation of MSCI Index Reviews▪ Staggering an index review implementation involves the conversion
from ‘current’ index to ‘pro forma’ index over an implementation periodthat would commence 3 days prior to the Index Review effective date

▪ MSCI proposes to apply a staggered implementationconsistently across the MSCI Global Investable Market Indexes(GIMI) and all Non-Market Cap Weighted Indexes

5Staggered Implementation: Illustration• During an Index Review, the index changes are defined in terms of the ‘number ofshares changes in the index*’ (NOS)‒ Staggering the NOS changes allows the index review implementation to be
determined ahead and helps avoid potential reverse turnover in the staggering
period• With the current single day implementation, the NOS changes are expected to change
as follows:

Company A - add

Current

T-3

T-2

T-1

Effective Date

0

0

0

7,500

7,500

NOS Change

7,500

Company B – delete

5,100

5,100

5,100

NOS Change

00-5,100Company C – FIF/NOS

6,000

6,000

6,000

NOS Change

6,300

6,300

300

• With the proposed staggered 3-day implementation, the NOS changes will be linearly
spread across 3 days, thereby reducing the number of shares to be traded per day toreplicate

Company A - add

Current

Stagger day1

Stagger day2

Stagger day3

Effective

0

2,500

5,000

7,500

7,500

2,500

2,500

2,500

3,400

1,700

0

-1,700-1,700-1,700

6,100

6,200

6,300

100

100

100

NOS Change
Company B – delete

5,100

NOS Change
Company C – FIF/NOSNOS Change

6,000* Number of shares changes in the index for the MSCI GIMI is calculated as the index number of shares
multiplied by the Foreign Inclusion Factor (FIF)

0
6,300

6

Impact of Staggered Implementation on Corporate Events
Various corporate events that impact MSCI Indexes around the implementation dates
can be grouped into 3 broad categories:
Event
confirmation dateEvent
effective date

ImpactCase 1

Post Rebalance Ann
Date

Before staggering
periodNo impact to staggered values

Case 2

Prior to Rebalance
Ann Date

Within staggering
periodNo staggering until the effective date of the event,followed by relatively larger changes

Case 3

Post Rebalance Ann
Date

Within staggering
periodMaintain the NOS announced on t-9 until the effective
date of the event, re-evaluate staggering post that

Timeline
May 18May 19

May 20

T-9
Rebalance Ann
Date

T-8

May 21

May 22

May 25

From T-8 to T-4(Pro-forma period prior to
staggering)May 26

May 27

T-4

T-3

May 28May 29From T-3 to T-1
T-1(Staggering
Period)Jun 1

T
Effective
Date

7Potential Impact of a Staggered Rebalancing➢ A staggered rebalancing approach aims to split the implementation of rebalancingchanges into several steps until it is fully implemented in the index➢ Three days could provide a good balance between transaction cost reduction andsufficient time for implementation

Potential Marginal benefit of staggering
Transaction Cost (bps)

600 30 bln

While the marginal benefit
may decrease with tradesize, a staggered approach
could allow for lower
transaction costs

6 bln

1.2 bln

1 bln

200 mln

40 mln

500
400
300
200
100
0

Staggering rebal of ACWI May-20 SAIR change portfolio, if implemented on 15-May-20
Source: MSCI, Virtu*For this analysis, a model (by Virtu) was used which measures trading costs using the difference between the
average execution price and the prevailing price at the start of the order execution. This measure includes both thebidask spreadas well as theprice impact cost of the order. For market impact, Viirtu uses a 60 business day historicalvolatility as main input to liquidity model. These historical examples are not indicative of future results or potential
costs.
Announcementof Results
9 days toeffective date

T-8

T-7

T-6

T-5

T-4

1st day
stagger

2nd day
stagger^Currently, MSCI calculates a variant of the MSCI USA Momentum Index that is staggered across three days

3rd day
stagger

Effective date8

Daily Traded Values for rebalancing are on the rise
An increasing trend in terms of Daily Traded Value for the rebalancing portfolio* aroundthe index review implementation date is observed

EM DTV for rebalancing portfolio

0.7

Billions

Billions

DM DTV for rebalancing portfolio
0.6
0.5

0.8
0.7
0.6

0.4

0.5

0.3

0.4
0.3

0.2

0.2

0.1
0
Dec-071
0.9

0.1
Jun-10World (t-1)

Dec-12
World (t-2)

Jun-15

Dec-17
World (t-3)

Jun-200
Dec-07

Jun-10EM (t-1)

Dec-12EM (t-2)

Jun-15

Dec-17

Jun-20EM (t-3)*Rebalancing portfolio can be defined as the portfolio (related to a given index) which reflect additions, deletions, and other maintenance changes required to
fully replicate a given Index Review (effectively the full ‘pro-forma’ portfolio)

9Consideration of Alternative Measures➢ MSCI also considered and examined these alternatives related to mitigation of the
impact of Index Reviews
Considered Alternatives

Reasons for Not Adopting❑ Applying wider buffers▪ Wider buffers may deteriorate index
representativeness❑ Applying SAIR rules in place of QIRs to
spread the index review changes▪ More frequent SAIRs could increase annual
turnover▪ Rebalancing turnover has been generally stable andwithin acceptable range❑ Setting ‘hard’ IR turnover constraints▪ No observed increase in bid/ask spreads or otherilliquidity measures outside volatile periods❑ Split GIMI and non-market cap
weighted index implementation▪ Disconnecting GIMI and non-market cap weighted
indexes may result in unnecessary methodology
complexities for investors

10

Discussion Points➢ Does the increased market impact of MSCI index review implementations now
warrant MSCI to address the rebalancing related issues as noted?

➢ Do you agree with the proposal to stagger the implementation of index reviews acrossthe MSCI GIMI and Non-Market Cap Weighted Indexes?

▪ Do you agree with the proposed 3 days to stagger such implementation?
▪ Should MSCI employ consistency of the staggered approach to all indexes asproposed or only the MSCI GIMI?

▪ Should MSCI consider moving the announcement date of the index review
results to provide greater time to process the rebalancing?

➢ Should MSCI consider other alternatives which could potentially ease market impact
and facilitate implementation of index reviews? (i.e. a combination of staggering
approach with other alternatives)

11Index Review Implementation
under Market Stress
Proposal© 2020 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

Proposal: Switch to a ‘Light’ Rebalancing during
Market Stress conditions➢ Historically, there have been noticeable spikes in liquidity and transaction cost metrics
during times of market stress. While turnover and number of additions and deletions in‘normal’ market conditions have generally been stable, increases are noticeably
observed in periods where volatility is higher➢ In times of market stress, in addition to the staggered implementation, MSCI
proposes to switch to a ‘light’ rebalancing▪ A ‘light’ rebalancing generally focuses on replacing a scheduled SAIR with a QIR(if such QIR is defined by a methodology)▪ Employment of these measures would not be preceded by any public
consultation▪ If the upcoming scheduled rebalance is already a QIR, then no change to theprocess would occur➢ To determine market stress, MSCI would consider dimensions that are part of the
MSCI Market Monitoring Framework as well as additional measures of market
volatility

13‘Light’ Rebalancing for Various Methodologies➢ Differentiation of ‘normal’ rebalancing schedules are present across index
methodologies➢ As noted, under market stress conditions, a QIR rebalancing would generally beapplied if defined by a methodology➢ For methodologies which rebalance annually or where QIRs are not defined, MSCI
would proceed as per the normal rebalancing schedule
Proposed Rebalancing schedules for various methodologies‘Normal’ Rebalancing Schedule

Proposed
Rebalancing
schedule duringmarket stressIndex Methodology Example

Semi Annual + QIR

QIRMSCI Global Investable Market Indexes;
MSCI ESG Universal Indexes

Annual only

AnnualMSCI GDP Weighted Indexes

Annual + QIRAnnualMSCI Top 50 Dividend Indexes

Semi-Annual only

Semi-Annual

MSCI Minimum Volatility Indexes

QIR only

QIR

MSCI Equal Weighted Indexes

MonthlyMonthly

MSCI Hedged Indexes

14➢How should Market Stress be determined?

The primary means to determine market stress will focus on the MSCI Market Monitoring
Framework which looks at:

▪
▪
▪
➢

Market Functioning
Market Liquidity
Data Availability

MSCI may also consider other measures which:▪
Appropriately capture marketrisk▪
▪

Are sufficiently reactive to allow for prompt and timely decisions
Provide enoughstability to consistently capture only ‘extreme’ events

As example, the Global Total Market Trading (GEMTRD) risk model could be considered as a measure ofmarket stress/volatility. Note the peaks which show the 2008 GFC and COVID-19 crises

GEMTRD Forecasted Risk
80
70
60
50
40
30
20
10
0

15

Applying QIR thresholds led to a reduced number of index changes
Historical Average of Index Review Changes (20072020)
160

3.50%

140

3.00%

120

DM add/dels/ DM turnoverEM add/dels/ EM turnover
ACWI add/dels / ACWI turnover

2.50%

100

2.00%

80

1.50%

60

1.00%

40

0.50%

20
-

Historically, QIRs had
significantly lower number ofchanges and turnover than
SAIRs

0.00%
Feb QIR

May SAIR

Aug QIR

Nov SAIR

Simulated May 2020 SAIR for ACWI using QIR thresholds

Turnover1.687%

1.344%

Based on simulation of the
May 2020 SAIR, applying QIR
thresholds led to lower
number of index review
changes and turnoverBased on simulation of May 2020 SAIR using QIR thresholds, if FIF/NOS changes are notconsidered, turnover would be approximately 0.66%

16Impact Substantially Rose during Market Stress
Simulated Market Impact of May 2020 SAIR on different dates
20
18

500

16
400

14

300

12
10

200

8
100
0
2020-01-03*Source: MSCI, Virtu

6

Bid-Ask Spread (bps)Transaction Cost (bps)

600

42020-02-03

2020-03-03

2020-04-03

2020-05-03

ACWI IMI (Transaction Cost)

ACWI (Transaction Cost)

ACWI IMI (Bid-Ask Spread)

ACWI (Bid-Ask Spread)

2020-06-03

While we do not see a substantial dislocation in terms of turnover and numbersof additions and deletions during ‘normal’ times, there are noticeable spikes inliquidity and transaction cost* metrics observed during times of market stress*Transaction costs are based on a model (Virtu) which measures trading costs using the difference between the average execution price and the prevailing price atthe start of the order execution. This measure includes both the bid-ask spread as well as the price impact cost of the order. For market impact, Virtuuses a 60
business day historical volatility as main input to liquidity model.

17

Discussion Points➢ Do you agree with the proposal to implement a ‘light’ rebalancing in times ofsignificant market stress?

▪ Is it appropriate to apply QIR thresholds in place of SAIR rules for the MSCI GIMI
in times of defined market stress?

▪ Do you agree with the proposal to apply ‘light’ rebalancing for the Non-Market
Cap Weighted Indexes, if QIR is defined by the relevant index methodologies?

▪ Is it appropriate to proceed with the normal rebalancing schedule for the NonMarket Cap Weighted Indexes, if a QIR is not defined by the relevant index
methodology (i.e. Semi-Annual only)?

▪ What is the appropriate advance notice period to inform market participants ofmoving to a ‘light’ rebalancing?

▪ Is the evaluation of market stress through the three dimensions of the MSCI
Market Monitoring Framework sufficient ? What other/different measures
should potentially be employed?

18

Appendix© 2020 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

AUM in Equity ETFs linked to MSCIAUM in Equity ETFs
$1,000
$900

$800
$600
$500
$400

Billions

$700

$300
$200
$100

Feb'09Jun'09Oct'09Feb'10
Jun'10
Oct'10Feb'11
Jun'11
Oct'11
Feb'12
Jun'12
Oct'12
Feb'13
Jun'13
Oct'13
Feb'14
Jun'14
Oct'14
Feb'15
Jun'15Oct'15
Feb'16
Jun'16Oct'16
Feb'17
Jun'17
Oct'17
Feb'18Jun'18Oct'18Feb'19Jun’19Oct'19Feb'20Jun'20$0• AUMs have increased over the past decade
SOURCE https://ir.msci.com/aum-etfs-linked-msci-indexes
1 For periods prior to April 2019, estimates were based on data from Bloomberg and MSCI.
2 For April 2019, a) the Month-End Balance is an estimate based on data from Refinitiv and MSCI, b) the Monthly Average Balance is an
estimate based on data from Bloomberg and MSCI for the period from April 1 through April 25 and on data from Refinitiv and MSCI for theperiod from April 26 through April 30; provided that de minimis amounts of AUM for the Month-End Balance and Monthly Average Balance
were based on data as of April 25, 2019 from Bloomberg.
3 For May 2019 and later months, the Month-End Balance and the Monthly Average Balance are estimates based on data from Refinitiv andMSCI, which may include de minimis amounts of delayed data.
The AUM in Equity ETFs also includes AUM in Exchange Traded Notes, the value of which is less than 1.0% of AUM amounts presented.

20

Simulated May 2020 SAIR using different thresholds
Simulated May 2020 SAIR using different thresholds

2.0%

200

150
1.5%

1.0%

100
138

104

53

-180

-157

-35

0.5%

50
0
-50
-100
-150

0.0%

-200
Actual May 2020 SAIRACWI Adds

May 2020 SAIR w/
wider buffers
ACWI Dels

May 2020 QIR
TurnoverApplying QIR thresholds leads to significantly lower number of index review changes andturnover, including SAIR with widened buffers

21

Simulated 2019 Index Reviews using SAIR thresholds
Turnover- MSCI World Index• Rebalancing using SAIR
rules at each review would
even out the quarterly
turnovers, but would resultin a slightly higher total
annual turnover

1.1%
1.0%
0.9%
0.8%
0.7% 0.62%
0.6%
0.5%
0.43%
0.4%
0.3%
0.2%
0.1%
0.0%
Feb-19

1.00%

0.77%

0.86%

0.74%

0.59%
0.36%

May-19Aug-19Annual Actual
Turnover:2.52%

Annual Sim.
Turnover:2.84%

Nov-19Index Movements- MSCI World Index• This would result in
preponing some SAIR
movements to the previous
QIR (i.e. more timely
market representation)

50

50

40

40

30

3024

20

20

10

10

0

0

-10 -10• The full-year 2019
simulation did not result
in reverse turnovers

40

37

35

28

23

4

4

-1

-3

-20 -20-15-17-30 -30-40 -40
Feb-19Feb-19Pulled-Up Adds

-23

May-19
May-19Actual Dels
Sim. Adds
Sim. Dels

-23

-22

Aug-19Aug-19-35
Nov-19
Nov-19Other Adds AddsPulled-Up
Dels Dels

Actual Adds

Preponed
movements insim. vs actual

Other Dels

22

Extended Simulation of Applying SAIR Thresholds (DM)• MSCI simulated the impact of applying

80

SAIR rules across each index review(referred to as sim) and compared thiswith the current methodology, whichalternates between SAIR and QIR rules(referred to as base)

60
40
20
0
-20

• This alternative resulted in “smoother”

-40
-60

historical turnover, by increasing thenumber of changes in February andAugust and, as a consequence,
decreasing the “accumulated” numberof changes needed in May andNovember

-80
-100
-120

base add

1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%

sim addbase delsim delbase turnoversair turnover

9/1/2020

6/1/2020

3/2/2020

11/27/2019

8/28/20195/29/2019

3/1/2019

12/3/2018

9/3/2018

6/1/2018

3/1/2018

12/1/2017

9/1/2017

6/1/2017

3/1/2017

12/1/2016

9/1/2016

6/1/2016

3/1/2016

12/1/2015• (ABOVE) On average, applying SAIR

rules at each review for DM resulted
in an average of 23.7 additions and20.7 deletions compared to 21.4 and17.3 respectively for the current
methodology• (LEFT) Turnover increased from
0.39% to 0.43% on average perrebalancing

Simulation is for Nov 2015 SAIR to Aug 2020 QIR. The turnover calculation does not consider changes in Number of Shares(NOS) and Foreign Inclusion Factors (FIF).

23

Extended Simulation of Applying SAIR Thresholds (EM ex CN)• Similarly to Developed Markets, the60

simulated turnover, generated byapplying current Semi-Annual Index
Review rules four times a year, is also“smoother”.

40
20
0

• The increase in turnover in May 2019 is-20

primarily resulting from Argentina andSaudi Arabia reclassification to
Emerging Markets

-40
-60

• For the purpose of this simulation

China market is excluded to remove
impact resulting from China A inclusionbase add

5.00%
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%

sim addbase delsim delbase turnover

9/1/2020

6/1/2020

3/2/2020

11/27/2019

8/28/20195/29/2019

3/1/2019

12/3/2018

9/3/2018

6/1/2018

3/1/2018

12/1/2017

9/1/2017

6/1/2017

3/1/2017

12/1/2016

9/1/2016

6/1/2016

3/1/2016

12/1/2015• (ABOVE) On average, applying SAIR
rules at each review for EM ex CN
resulted in an average of 14.5 additions
and 14.8 deletions compared to 13.5
and 13.4 respectively for the current
methodology• (LEFT) Turnover increased from 0.89%
to 0.96% on average per rebalancing

sim turnover

Simulation is for Nov 2015 SAIR to Aug 2020 QIR. The turnover calculation does not consider changes in Number of Shares(NOS) and Foreign Inclusion Factors (FIF).

24

GEMTRD Forecasted Risk
GEMTRD Forecasted Risk (2008)
70
60
50

40
30
20
10
0

GEMTRD Forecasted Risk (2020)
80
70
60
50
40
30
20
10
0
1/1/2020

2/1/2020

3/1/2020

4/1/2020

5/1/2020

6/1/2020

7/1/2020

25

GEMTRD Forecasted Risk
• The GEMTRD Forecasted Risk exhibit high correlation with other indicators suchas VIX (0.88) and Credit Spread (0.72)
GEMTRD vs VIX and Credit Spread
70

9
8

60

7

50

6

40

5

30

4
3

20

2

10

1

0

0

VIX

GEMTRD

CREDIT_SPREAD*Source: MSCI, Chicago Board Options Exchange (CBOE) Volatility Index, ICE BofAML Fixed Income indices26

Historical number of index review changes
Number of ACWI securities in Buffer Zones (SAIR buffers)

Small above upper buffer
Standard below lower buffer

Historical Breakdown of ACWI Add-Deletes
450

Additions (newly eligible)

400• Higher number of migrations
are observed during volatile
markets

Upward migrations

350

Deletions300

Downward migrations

250
200
150
100

50
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2
Qtr3
Qtr4
Qtr1
Qtr2

0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

27

Historical Index Turnover
GIMI Turnover on SAIRs
5
4.5
4
3.5

EM May SAIR
avg: 3.23

3
2.5
2
1.5

World MaySAIR avg: 1.12

1
0.5
0Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2 Qtr4 Qtr2

2007

2008

2009

2010

2011

2012
ACWI

2013

2014

EM (EMERGING MARKETS)

2015

2016

2017

2018

2019

2020

WORLD

• The turnover at the ACWI level generally remained stable since the inception of the

GIMI– Some increase was observed as part of the May 2008 and May 2020 SAIRs, wherevolatility is higher*Turnover for Q4 2007 and Q2 2008 are based on the turnovers calculated for provisional indexes at the time of the methodology transition MSCI Standard
Indexes Methodology to MSCI GIMI Methodology

28

About MSCIMSCI is a leading provider of critical decision support tools andservices for the global investment community. With over 45 years ofexpertise in research, data and technology, we power better investment

decisions by enabling clients to understand and analyze key drivers ofrisk and return and confidently build more effective portfolios. We
create industry-leading research-enhanced solutions that clients use togain insight into and improve transparency across the investment

process. To learn more, please visit www.msci.com.

29

Contact us
AMERICASEUROPE, MIDDLE EAST
& AFRICAASIA PACIFIC

Americas+1 888 588 4567 *Cape Town + 27 21 673 0100

China North 10800 852 1032 *Atlanta+ 1 404 551 3212

Frankfurt+ 49 69 133 859 00

China South 10800 152 1032 *Boston+ 1 617 532 0920

Geneva+ 41 22 817 9777

Hong Kong+ 852 2844 9333

Chicago+ 1 312 675 0545

London+ 44 20 7618 2222

Mumbai+ 91 22 6784 9160

Monterrey+ 52 81 1253 4020

Milan

+ 39 02 5849 0415

Seoul

00798 8521 3392 *New York+ 1 212 804 3901

Paris

0800 91 59 17 *Singapore800 852 3749 *San Francisco + 1 415 836 8800

Sydney+ 61 2 9033 9333

São Paulo+ 55 11 3706 1360

Taipei008 0112 7513 *Toronto+ 1 416 628 1007

Thailand

0018 0015 6207 7181 *Tokyo+81 3 5290 1555

* = toll freemsci.comclientservice@msci.com

The process for submitting a formal index complaint can be found on the index regulation page of MSCI’s website at:https://www.msci.com/index-regulation.

30

Notice & disclaimer
This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct
or indirect suppliers or any third party involved in making or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information may not be modified, reverseengineered, reproduced or redisseminated in whole or in part without prior written permission from MSCI.
The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation), the Information may not be used to create indexes, databases, risk models, analytics,
software, or in connection with the issuing, offering, sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to, tracking or otherwise derived from theInformation or any other MSCI data, information, products or services.
The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE INFORMATION PROVIDERS MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONSWITH RESPECT TO THE INFORMATION (OR THE RESULTS TO BE OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH INFORMATION PROVIDER EXPRESSLY DISCLAIMS ALLIMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS, NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULARPURPOSE) WITH RESPECT TO ANY OF THE INFORMATION.
Without limiting any of the foregoing and to the maximum extent permitted by applicable law, in no event shall any Information Provider have any liability regarding any of the Information for any direct, indirect, special, punitive,
consequential (including lost profits) or any other damages even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited, including without
limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the negligence or willful default of itself, its servants, agents or sub-contractors.
Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Past performance does not guarantee future results.
The Information should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. All Information
is impersonal and not tailored to the needs of any person, entity or group of persons.
None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or any trading strategy.
It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index. MSCI does
not issue, sponsor, endorse, market, offer, review or otherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on, linked to or seeks to provide aninvestment return related to the performance of any MSCI index (collectively, “Index Linked Investments”). MSCI makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment
returns. MSCI Inc. is not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in any Index Linked Investments.
Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees aninvestor may pay to purchase the securities underlying the index or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be different than the MSCI index
performance.
The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently material differences between back tested performance results and actual results subsequently
achieved by any investment strategy.
Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of the relevant index methodologies. Accordingly, constituents in MSCI equity indexes may include
MSCI Inc., clients of MSCI or suppliers to MSCI. Inclusion of a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.
Data and information produced by various affiliates of MSCI Inc., including MSCI ESG Research LLC and Barra LLC, may be used in calculating certain MSCI indexes. More information can be found in the relevant index methodologies onwww.msci.com.
MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor
Relations section of www.msci.com.
MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with respect to any applicable products or services from MSCI ESG Research, neither MSCI nor
any of its products or services recommends, endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s products or services are not intended
to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include
MSCI Inc., clients of MSCI or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. MSCI ESG Research materials, including materials utilized in any MSCI ESG Indexes or otherproducts, have not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body.
Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, IPD and other MSCI brands and product names are the trademarks, service marks, or registered trademarks of MSCI
or its subsidiaries in the United States and other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor’s. “Global Industry Classification Standard(GICS)” is a service mark of MSCI and Standard & Poor’s.
MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does it deal on its own account, provide execution services for others or manage client
accounts. No MSCI ESG Research product or service supports, promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings based on publishedmethodologies and available to clients on a subscription basis. We do not provide custom or one-off ratings or recommendations of securities or other financial instruments upon request.
Privacy notice: For information about how MSCI ESG Research LLC collects and uses personal data concerning officers and directors, please refer to our Privacy Notice at https://www.msci.com/privacy-pledge.

•

This consultation may or may not lead to any changes in MSCI’s indexes. Consultation feedback will remain confidential unless a participant
requests that its feedback be disclosed. In that case, the relevant feedback would be published at the same time as the final results of theconsultation.
31