Index Methodology

MSCI India ESG
Enhanced Focus CTB
Select Index
August 2024

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Contents
1. Introduction ............................................................................................................. 3
2. Constructing the Index ............................................................................................. 4
2.1 Defining The Exclusion Criteria .................................................................................... 4
2.1.1 Business Exclusion Criteria ....................................................................................... 4
2.2 Optimization Constraints .............................................................................................. 5
2.3 Determining the Optimized Index................................................................................. 5
2.4 Treatment of Unrated Companies ............................................................................... 5
3. Maintaining the Index .............................................................................................. 6
3.1 Quarterly Index Reviews................................................................................................ 6
3.2 Monthly Review of Controversies ................................................................................ 6
3.3 Ongoing Event-Related Maintenance .......................................................................... 6
4. MSCI ESG Research ................................................................................................. 8
4.1 MSCI ESG Ratings ......................................................................................................... 8
4.2 MSCI ESG Controversies .............................................................................................. 8
4.3 MSCI ESG Business Involvement Screening Research .............................................. 8
4.4 MSCI Climate Change Metrics ..................................................................................... 8
4.5 MSCI ESG Sustainable Impact Metrics ....................................................................... 9
Appendix I: Business Exclusion Criteria ..................................................................... 10
Appendix II: Optimization Constraints ........................................................................ 12
Appendix III: Barra Equity Model Used in The Optimization ........................................ 14
Appendix IV: New Release of Barra® Equity Model or Barra® Optimizer .................... 15
Appendix V: Calculation of Target Metrics ................................................................. 16
Appendix VI: Methodology Set ................................................................................... 20
Appendix VII: Changes to this Document ................................................................... 21© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

1. Introduction
The MSCI India ESG Enhanced Focus CTB Select Index1 (the ‘Index’) is designed to maximize
exposure to positive environmental, social and governance (ESG) factors while maintaining risk andreturn characteristics similar to those of the MSCI India Index (the ‘Parent Index’).
The Index is constructed by selecting constituents of the Parent Index through an optimization
process that aims to maximize exposure to ESG factors for a target tracking error budget andexceed the minimum standards of the EU Climate Transition Benchmark (CTB).
The Index is constructed following an optimization-based approach and aims to:•

Exceed the minimum technical requirements laid out for EU Climate Transition Benchmarksin the EU Delegated Acts2•

Reduce the weighted average greenhouse gas intensity by 30% relative to the Parent Index.

•

Reduce the weighted average greenhouse gas (GHG) intensity by 7% on an annualized basis.

•

Reduce the weighted average potential emissions intensity by 30% relative to the Parent
Index.

•Have at least equivalent ratio of weighted average “Green Revenues” to weighted average“Fossil Fuels-based Revenues” as that of the Parent Index.

•

Increase the weight of companies with credible carbon reduction targets through theweighting scheme.

•

Be sector-diversified and target companies with high ESG ratings in each sector.

1 The Index is governed by a set of methodology and policy documents (“Methodology Set”), including the present index

methodology document. Please refer to Appendix VI for more details
2

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

2. Constructing the Index
The Index uses company ratings and research provided by MSCI ESG Research3 for index
construction.
The Index is constructed from the MSCI India Index. The construction of the Index further involves
the following steps:•

Defining the exclusion criteria•

Defining the optimization constraints•

Determining the optimized portfolio

The steps mentioned above are defined in detail in the subsequent sections.

2.1 Defining The Exclusion Criteria
Securities of companies involved in Very Severe business controversies as defined by the MSCI ESG
Controversies Methodology are not eligible for inclusion in the Index. This is implemented by
excluding constituents of the Parent Index with ESG Controversy Score = 0 (‘Red Flag’ companies).

2.1.1 Business Exclusion Criteria
Companies that are involved in specific businesses which have high potential for negative social
and/or environmental impact are ineligible for inclusion in the Index.
•

Controversial Weapons•

Nuclear Weapons•

Civilian Firearms•

Tobacco•Thermal Coal•

Conventional Weapons•

Unconventional Oil and Gas

In addition to the above, companies that fail to comply with the United Nations Global Compact
Principles are also excluded from the Index.
In addition, companies with an Environment Controversy Score4 of 0 or 1 will also be excluded fromthe Index.
Please refer to Appendix I for more details on these criteria
3 See section 4 for further information regarding ESG and climate data used in the Indexes that MSCI Limited and MSCI DeutschlandGmbH source from MSCI ESG Research LLC, a separate subsidiary of MSCI Inc. MSCI ESG Research is solely responsible for thecreation, determination and management of such data as a provider to MSCI Limited and MSCI Deutschland GmbH. MSCI Limited
and MSCI Deutschland GmbH are the benchmark administrators for the MSCI indexes.
4 This ESG pillar is an assessment of controversies (if any) related to a firm’s impact on the environment. Factors affecting thisevaluation include whether a company is involved in controversies related to land use and biodiversity, toxic spills and releases,
energy and climate change, water management, operational non-hazardous waste, and management of supply chain environmental
impact. MSCI Environment Controversy Score falls on a 0-10 scale, with “0” being the most severe controversy.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

2.2 Optimization Constraints
The optimization process aims to maximize the Index’s exposure to ESG scores for a given tracking
error budget. ESG scores are normalized and used in the optimization process. The following ex-ante
tracking error target is used for the construction of the Index –MSCI ESG Enhanced Focus CTB Index

Ex-Ante Tracking Error

MSCI India ESG Enhanced Focus CTB Select Index

1.5%

Normalization of the ESG scores is designed to allow the optimization process to assess each scorein the context of the overall distribution of the ESG scores.
Please refer to Appendix II for the optimization constraints. The definitions of the target metrics forthe optimization are detailed in Appendix V.

2.3 Determining the Optimized Index
The Index is constructed using the Barra Open Optimizer5 in combination with the relevant Barra
Equity Model. The optimization uses the universe of eligible securities and the specified optimization
objectives and constraints to determine the constituents of the Index.

2.4 Treatment of Unrated Companies
Companies not assessed by MSCI ESG Research on data for any of the following MSCI ESG
Research products are not eligible for inclusion in the Index.
•

MSCI ESG Ratings•

MSCI ESG Controversies

5 Please refer to Appendix II, III and IV for more details.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

3. Maintaining the Index
3.1 Quarterly Index Reviews
The Index is rebalanced on a quarterly basis to coincide with the regular Index Reviews (Semi-Annual
Index Reviews in May and November and Quarterly Index Reviews in February and August) of the
MSCI Global Investable Market Indexes. Changes are implemented at the end of February, May,
August and November. The pro forma Index is in general announced nine business days before theeffective date.
ESG scores used for the Quarterly Index Reviews will be taken as of the end of the month preceding
the Index Review, i.e., January, April, July, and October.
At each Index Review, the optimization process outlined in Section 3 is implemented.
In general, MSCI uses MSCI ESG Research data (including MSCI ESG Ratings, MSCI ESG
Controversies Scores, MSCI Business Involvement Screening Research, MSCI Climate Change
Metrics, and MSCI ESG Sustainable Impact Metrics) as of the end of the month preceding the Index
Reviews. For some securities, such data may not be published by MSCI ESG Research by the end of
the month preceding the Index Review. For such securities, MSCI will use ESG data published after
the end of month, when available.

3.2 Monthly Review of Controversies
Index constituents are reviewed on a monthly basis6 for the involvement in ESG controversies.
Existing constituents will be deleted if they face controversies as defined as defined by MSCI ESG
Controversy Score of 0 (‘Red flag’ companies). A Red Flag indicates an ongoing, Very Severe ESG
controversy implicating a company directly through its actions, products, or operations. ExistingIndex constituents with missing MSCI ESG Controversy Scores are not deleted during Monthly
Review of Controversies.
MSCI uses MSCI ESG Controversies data as of the end of the month preceding the review (e.g., endof June data for the July monthly review). For some securities, such data may not be published by
MSCI ESG Research by the end of the month preceding the review. For such securities, MSCI will use
ESG data published after the end of month, when available, for the monthly review of the Index.
The pro forma Index is generally announced nine business days before the effective date.

3.3 Ongoing Event-Related Maintenance
The general treatment of corporate events in the Index aims to minimize turnover outside of Index
Reviews. The methodology aims to appropriately represent an investor’s participation in an event
based on relevant deal terms and pre-event weighting of the Index constituents that are involved.
Further, changes in Index market capitalization that occur as a result of corporate event
implementation will be offset by a corresponding change in the Variable Weighting Factor (VWF) of
the constituent.

6 Effective January 1,2024 the Monthly Review of Controversies was applied.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

The following section briefly describes the treatment of common corporate events within the MSCI
India ESG Enhanced Focus CTB Select Index. No new securities will be added (except where noted
below) to the Index between Index Reviews. Parent Index deletions will be reflected simultaneously.

EVENT TYPE

EVENT DETAILSNew additions to the Parent Index

A new security added to the Parent Index (such as IPO
and other early inclusions) will not be added to theIndex.

Spin-Offs

All securities created as a result of the spin-off of an
existing Index constituent will be added to the Index
at the time of event implementation. Reevaluation forcontinued inclusion in the Index will occur at thesubsequent Index Review.

Merger/Acquisition

For Mergers and Acquisitions, the acquirer’s post
event weight will account for the proportionate
amount of shares involved in deal consideration, while
cash proceeds will be invested across the Index.
If an existing Index constituent is acquired by a nonIndex constituent, the existing constituent will bedeleted from the Index and the acquiring nonconstituent will not be added to the Index.

Changes in Security Characteristics

A security will continue to be an Index constituent if
there are changes in characteristics (country, sector,
size segment, etc.) Reevaluation for continued
inclusion in the Index will occur at the subsequentIndex Review.

Further detail and illustration regarding specific treatment of corporate events relevant to this Index
can be found in the MSCI Corporate Events Methodology book under the sections detailing thetreatment of events in Capped Weighted and Nonmarket Capitalization Weighted Indexes.
The MSCI Corporate Events methodology book is available at: https://www.msci.com/Indexmethodology.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

4. MSCI ESG Research
The Index is a product of MSCI Inc. that utilizes information such as company ratings and research
produced and provided by MSCI ESG Research LLC (MSCI ESG Research), a subsidiary of MSCI Inc.
In particular, the Index uses the following MSCI ESG Research products: MSCI ESG Ratings, MSCIESG Controversies, MSCI ESG Business Involvement Screening Research, MSCI Climate Change
Metrics, MSCI Impact Solutions, MSCI ESG Ratings, and MSCI ESG Governance Metrics. MSCI
Indexes are administered by MSCI Limited and MSCI Deutschland GmbH.

4.1 MSCI ESG Ratings
MSCI ESG Ratings aim to measure entities’ management of environmental, social and governancerisks and opportunities. MSCI ESG Ratings use a weighted average key issue calculation that isnormalized by industry to arrive at an industry-adjusted ESG score (0-10), which is then translated toa seven-point scale from ‘AAA’ to ‘CCC’, indicating how an entity manages relevant key issues
relative to industry peers.
The MSCI ESG Ratings methodology can be found at: https://www.msci.com/legal/disclosures/esgdisclosures.

4.2 MSCI ESG Controversies
MSCI ESG Controversies provide assessments of controversies concerning the potential negativeenvironmental, social, and/or governance impact of company operations, products and services. The
evaluation framework used in MSCI ESG Controversies is designed to be consistent withinternational norms represented by the UN Declaration of Human Rights, the ILO Declaration on
Fundamental Principles and Rights at Work, and the UN Global Compact. MSCI ESG Controversies
Score falls on a 0-10 scale, with “0” being the most severe controversy.
The MSCI ESG Controversies methodology can be found at:https://www.msci.com/legal/disclosures/esg-disclosures.

4.3 MSCI ESG Business Involvement Screening Research
MSCI ESG Business Involvement Screening Research (BISR) aims to enable institutional investors tomanage environmental, social and governance (ESG) standards and restrictions reliably andefficiently.
The MSCI Business Involvement Screening Research methodology can be found at:https://www.msci.com/legal/disclosures/esg-disclosures.

4.4 MSCI Climate Change Metrics
MSCI Climate Change Metrics provides climate data & tools to support institutional investors
seeking to integrate climate risk & opportunities into their investment strategy and processes. This
includes investors seeking to achieve a range of objectives, including measuring and reporting on
climate risk exposure, implementing low carbon and fossil fuel-free strategies, alignment withtemperature pathways and factoring climate change research into their risk management processes,
in particular through climate scenario analysis for both transition and physical risks.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

The dataset spans across the four dimensions of a climate strategy: transition risks, green
opportunities, physical risks and 1.5° alignment.
For more details on MSCI Climate Change Metrics, please refer to https://www.msci.com/climatechange-solutions.

4.5 MSCI ESG Sustainable Impact Metrics
MSCI ESG Research’s Sustainable Impact Metrics is designed to identify companies that currently
offer products or services that address at least one of the major social and environmental
challenges as defined by the UN Sustainable Development Goals. Designed as a positive screen, it isdesigned to highlight companies that are deriving sales from products or services that may have apositive impact on society and the environment.
For more details on the MSCI ESG Sustainable Impact Metrics, please refer tohttps://www.msci.com/esg-sustainable-impact-metrics© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix I: Business Exclusion Criteria
MSCI ESG Research has developed a framework designed to define significant involvement incontroversial activities. According to this framework, there are three tolerance levels: Zero
Tolerance, Minimal Tolerance and Low Tolerance.
Each controversial activity screened by the MSCI India ESG Enhanced Focus CTB Select Index(except Thermal Coal, Oil Sands and Global Norms) is assigned to one of these tolerance levels:
Activities classified under “Zero Tolerance”•

Controversial WeaponsoAll companies with any tie to Controversial Weapons (cluster munitions, landmines,
depleted uranium weapons, biological/chemical weapons, blinding lasers, nondetectable fragments and incendiary weapons), as defined by the methodology of
the MSCI Ex-Controversial Weapons Indexes available athttps://www.msci.com/index-methodology.

Activities classified under “Minimal Tolerance”•••

Nuclear WeaponsoAll companies that manufacture nuclear warheads and/or whole nuclear missiles.

oAll companies that manufacture components that were developed or are significantly
modified for exclusive use in nuclear weapons (warheads and missiles).

o

All companies that manufacture or assemble delivery platforms that were developedor significantly modified for the exclusive delivery of nuclear weapons.

oAll companies that provide auxiliary services related to nuclear weapons.

oAll companies that manufacture components that were not developed or not
significantly modified for exclusive use in nuclear weapons (warheads and missiles).

o

All companies that manufacture or assemble delivery platforms that were notdeveloped or not significantly modified for the exclusive delivery of nuclear weapons.

oAll companies that manufacture components for nuclear-exclusive delivery
platforms.

Civilian FirearmsoAll companies classified as “Producer” of firearms and small arms ammunitions forcivilian markets. It does not include companies that cater to the military, government,
and law enforcement markets.

oAll companies deriving 5% or more revenue from the distribution (wholesale or retail)of firearms or small arms ammunition intended for civilian use.

Tobaccoo

All companies classified as a “Producer”.

oAll companies deriving 5% or more aggregate revenue from the production,
distribution, retail and supply of tobacco-related products.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Activities classified under any specific tolerance level•••

Thermal CoaloAll companies deriving 5% or more revenue (either reported or estimated) from themining of thermal coal (including lignite, bituminous, anthracite and steam coal) andits sale to external parties. It excludes revenue from metallurgical coal; coal mined
for internal power generation (e.g. in the case of vertically integrated power
producers); intra-company sales of mined thermal coal; and revenue from coal
trading.

o

All companies deriving 5% or more revenue (either reported or estimated) from thethermal coal based power generation.

Conventional WeaponsoAll companies deriving 5% or more revenue from the production of conventional
weapons.

o

All companies deriving 10% or more aggregate revenue from weapons systems,
components and support systems and services.

Unconventional Oil and Gaso•All companies deriving 5% or more revenues from oil sands, oil shale (kerogen-rich
deposits), shale gas, shale oil, coal-seam gas, coal-bed methane as well as Arctic
onshore/offshore reserves.

Global Norms – United Nations Global Compact Complianceo

All companies that fail to comply with the United Nations Global Compact principles.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix II: Optimization Constraints
At each Quarterly Index Review, the following optimization constraints along with the ex-ante
tracking error targets defined in Section 3.4 are used to ensure replicability and investability.
Screened Parent
The Screened Parent is constructed by excluding securities from the Parent Index based on the
exclusion criteria as defined in Section 3.3. The security weights are then normalized to 100%.
Constraints imposed to meet transition and physical risk objectives
No.
1^
2
3^
4^
5^
6^

MSCI India ESG
Enhanced Focus
CTB Select Index

Transition and Physical Risk Objective
Minimum reduction in Greenhouse Gas (GHG) Intensity (Scope 1+2+3)
relative to the Parent Index
Minimum average reduction (per annum) in GHG Intensity relative to
GHG Intensity at the Base Date7
Minimum active weight in High Climate Impact Sector as (defined inAppendix V) relative to the Parent Index
Minimum Increase in aggregate weight in companies setting targets
relative to the aggregate weight of such companies in the Parent
Index. Companies Setting Targets are defined in Appendix V
Minimum reduction in Weighted Average Potential Emissions Intensity
relative to the Parent Index
Minimum ratio of Weighted Average Green Revenue/ Weighted
Average Fossil fuels-based Revenue

30%
7%
0%
10%
30%
At least equal

Diversification Constraints
No.

Parameter

Values1

Minimum Constituent Weight

Minimum constituent weight in the Screened Parent

2^

Asset Lower Bound

3^

Asset Upper Bound

4^

Active Sector Weights

+/-5%

5^

Active Country Weights*

+/-5%

6^
7^
8

Maximum (Minimum constituent weight in the Screened
Parent, 0.25 * Security Weight in the Screened Parent)
Minimum (5 * Security Weight in the Screened Parent,
Security Weight in the Screened Parent +2%)

One Way Turnover during May
and November Index Review
One Way Turnover during Feb
and Aug Index Review
Specific Risk Aversion

10%
5%
0.075

7 MSCI India ESG Enhanced Focus CTB Select Index has a base date of May 29, 2024

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

9

Common Factor Risk Aversion

0.0075* Active Country Weights – In case there are countries in the Parent Index which weigh less than
2.5% in the Parent Index, then for such countries the active country upper bound of +5% is notapplicable. When a country weighs less than 2.5% in the Parent Index then the upper bound ofcountry weight in the MSCI India ESG Enhanced Focus CTB Select Index is set at three times of thecountry’s weight in the Parent Index.
^ The Optimization Constraints are applied relative to the Parent Index.
Infeasible Solution –During the Semi-Annual or Quarterly Index Review, in the event that there is no optimal solution thatsatisfies all the optimization constraints, the following constraints will be relaxed, until an optimal
solution is found:•

The turnover constraint will be relaxed up to a maximum of 5 times of the original turnoverbudget in steps of 5%.

•

The ex-ante tracking error is relaxed up to a maximum of 5 times of the original ex-ante
tracking error in steps on 0.1%.

•

The one-way Index turnover constraint and the ex-ante tracking error constraint arealternately relaxed until a feasible solution is achieved.

In the event that no optimal solution is found after the above constraint relaxations are exhausted,
the relevant Index will not be rebalanced for that Index Review.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix III: Barra Equity Model Used in The Optimization
The Index currently uses an optimization setup using the MSCI Barra Global Equity Model for LongTerm Investors (GEMLTL).

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix IV: New Release of Barra® Equity Model or Barra®
Optimizer
The methodology presently uses MSCI Barra Global Equity Model for Long-Term Investors(“GEMLTL”) for the optimization. A new release of the relevant Barra Equity Model or Barra Optimizer
may replace the former version within a suitable timeframe.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix V: Calculation of Target Metrics
Calculation of GHG Intensity
For Parent Index constituents where the Scope 1+2+3 Emissions Intensity is not available, theaverage Scope 1+2+3 Emissions Intensity of all the constituents of the MSCI ACWI in the same
Global Industry Classification Standard (GICS®8 ) Industry Group in which the constituent belongs isused.
Security Level GHG Intensity =𝑆𝑐𝑜𝑝𝑒 1 + 2 + 3 𝐶𝑎𝑟𝑏𝑜𝑛 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 ∗ (1 + 𝐸𝑉𝐼𝐴𝐹)𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 𝑉𝑎𝑙𝑢𝑒 + 𝐶𝑎𝑠ℎ(𝑖𝑛 𝑀$)

Enterprise Value Inflation Adjustment Factor (EVIAF) =𝐸𝑉𝐼𝐴𝐹 = (𝐴𝑣𝑒𝑟𝑎𝑔𝑒(𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 𝑉𝑎𝑙𝑢𝑒 + 𝐶𝑎𝑠ℎ))−1
𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 (𝐴𝑣𝑒𝑟𝑎𝑔𝑒(𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 𝑉𝑎𝑙𝑢𝑒 + 𝐶𝑎𝑠ℎ))Weighted Average GHG Intensity of Parent Index =∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝑃𝑎𝑟𝑒𝑛𝑡 𝐼𝑛𝑑𝑒𝑥 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝐺𝐻𝐺 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

Weighted Average GHG Intensity of Derived Index =∑(𝐼𝑛𝑑𝑒𝑥 𝑊𝑒𝑖𝑔ℎ𝑡 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝐺𝐻𝐺 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

Calculation of Potential Carbon Emissions Intensity
For newly added companies to the Index where data is not available yet, MSCI uses zero fossil fuelreserves. Security Level Potential Carbon Emissions (PCE) Intensity =Absolute Potential Emissions ∗ (1 + EVIAF)Enterprise Value + Cash(in M$)

Weighted Average Potential Emissions Intensity of Parent Index =∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝑃𝑎𝑟𝑒𝑛𝑡 𝐼𝑛𝑑𝑒𝑥 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝑃𝐶𝐸 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

Weighted Average Potential Emissions Intensity of Derived Index =∑(𝐼𝑛𝑑𝑒𝑥 𝑊𝑒𝑖𝑔ℎ𝑡 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝑃𝐶𝐸 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

8 For further information regarding GICS, please refer to https://www.msci.com/gics© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Calculation of Average Decarbonization
On average, the Index follows a 7% decarbonization trajectory since the Base Date. The Weighted
Average GHG Intensity at the Base Date (W1) is used to compute the target Weighted Average GHG
Intensity at any given Quarterly Index Review (Wt) as per the below formula.
(𝑡−1)
4

𝑊𝑡 = 𝑊1 ∗ 0.93

Where ‘t’ is the number of Quarterly Index Reviews since the Base Date.
Thus, for the 5 th Quarterly Index Review since the Base Date (t=5), the target Weighted Average
GHG Intensity will be W1*0.93.

Companies Setting Targets
Relative to their corresponding Parent Index, the Index requires a minimum 20% increase in theaggregate weight of companies setting emissions reduction targets•

companies publishing emissions reduction targets•

companies publishing their annual emissions and•Companies reducing their GHG intensity by 7% over each of the last 3 years

Calculation of Green Revenue to Fossil fuels-based Revenue Multiple Green Revenue
For each constituent in the Parent Index, the Green Revenue% is calculated as the cumulative
revenue (%) from the six Clean Tech themes which are as follows:•

Alternative Energy – products and services that support the transmission, distribution andgeneration of renewable energy and alternative fuels to reduce carbon and pollutant
emissions in supporting affordable and clean energy to combat climate change.

•

Energy Efficiency – products, and services that support the maximization of productivity inlabor, transportation, power and domestic applications with minimal energy consumption toensure universal access to affordable, reliable and modern energy services.

•

Sustainable Water – products, services, infrastructure projects and technologies that resolve
water scarcity and water quality issues, through minimizing and monitoring current water
demand, improving the quality and availability of water supply to improve resource
management in both domestic and industrial use.

•

Green Building – design, construction, redevelopment, retrofitting, or acquisition of greencertified properties to promote mechanisms for raising capacity for effective climate change
mitigation and adaptation.

•

Pollution Prevention – products, services, infrastructure projects and technologies that
reduces volume of waste materials through recycling, minimizes introduction of toxic
substances, and offers remediation of existing contaminants such as heavy metals andorganic pollutants in various environmental media to significantly address pollution in alllevels and its negative effects.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024•

Sustainable Agriculture - revenues from forest and agricultural products that meetenvironmental and organic certification requirements to address significantly biodiversity
loss, pollution, land disturbance, and water overuse.

The Weighted Average Green Revenue% is calculated as:= ∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 ∗ 𝐺𝑟𝑒𝑒𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%)

Fossil fuels-based Revenue
For each constituent in the Parent Index, the Fossil fuels-based Revenue% is calculated as the
cumulative revenue (%) from the following sources:•

Revenue% (either reported or estimated) from the mining of thermal coal (including lignite,
bituminous, anthracite and steam coal) and its sale to external parties. It excludes revenue
from metallurgical coal, coal mined for internal power generation (e.g. in the case ofvertically integrated power producers), intra-company sales of mined thermal coal andrevenue from coal trading (either reported or estimated).

•

Revenue% from the extraction, production and refining of Conventional and Unconventional
Oil & Gas. Conventional Oil and Gas includes Arctic onshore/offshore, deep water, shallow
water and other onshore/offshore. Unconventional Oil and Gas includes oil sands, oil shale(kerogen-rich deposits), shale gas, shale oil, coal seam gas, and coal bed methane.

•

Revenue% from thermal coal based power generation, liquid fuel based power generationand natural gas based power generation.

The Weighted Average Fossil fuels-based Revenue% is calculated as:= ∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 ∗ 𝐹𝑜𝑠𝑠𝑖𝑙 𝑓𝑢𝑒𝑙𝑠 − 𝑏𝑎𝑠𝑒𝑑 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%)

The Green Revenues to Fossil fuels-based Revenues multiple for either the Parent Index or the Index
is calculated as a ratio of the Weighted Average Green Revenue to the Weighted Average Fossil
fuels-based Revenue as per the formula below:=

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐺𝑟𝑒𝑒𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%
𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 𝐹𝑜𝑠𝑠𝑖𝑙 𝑓𝑢𝑒𝑙𝑠 − 𝑏𝑎𝑠𝑒𝑑 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%

Climate Impact Sectors
NACE9 is the European Union’s classification of economic activities. As per the draft DA, stocks in
the NACE Section codes A, B, C, D, E, F, G, H, L are classified as “High Climate Impact” sector andother stocks are classified ‘Low Climate Impact’ sector. The GICS Sub-Industry code for eachsecurity is mapped to the corresponding “Climate Impact Sector” using a mapping. This mapping isconstructed in the following steps:
9 For further details regarding NACE, please refer to https://ec.europa.eu/eurostat/statistics-

explained/index.php?title=NACE_background© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

1. MSCI has published a mapping10 between the NACE classes and GICS SubIndustry.
2. For each GICS Sub-Industry, the number of NACE classes which fall under the High Climate
Impact Sector (say the number of classes is NH) and Low Climate Impact Sector (say the
number of classes is NL) is identified.
3. If all the NACE classes for a given GICS Sub-Industry are identified in the High Climate
Impact Sector (NL = 0), then the GICS Sub-Industry is mapped to the High Climate Impact
Sector. Conversely, if all the NACE classes for a given GICS Sub-Industry are identified in the
Low Climate Impact Sector (NH = 0) then the GICS Sub-Industry is mapped to the Low
Climate Impact Sector.
4. In case a GICS Sub-Industry is mapped to some NACE classes in the High Climate Impact
Sector and the others in the Low Climate Impact Sector, the GICS Industry is mapped to the
Climate Impact Sector in the following manner:a. NH >= NL: If the number of NACE classes in the High Climate Impact Sector is at least
equivalent to the number of NACE classes in the Low Climate Impact Sector, theGICS Sub-Industry is mapped to the High Climate Impact Sector.
b. NH < NL: If the number of NACE classes in the High Climate Impact Sector is lessthan the number of NACE classes in the Low Climate Impact Sector, the GICS SubIndustry is mapped to the Low Climate Impact Sector
Using the GICS Sub-Industry to Climate Impact Sector mapping created in Step 4, and the securitylevel GICS Sub-Industry, each security in the Parent Index is classified in either High Climate Impact
Sector or Low Climate Impact Sector.

10 This mapping is available in the Handbook of Climate Transition Benchmarks, Paris-Aligned Benchmark and Benchmarks’ ESG

Disclosures© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix VI: Methodology Set
The Index is governed by a set of methodology and policy documents (“Methodology Set”), including
the present index methodology document as mentioned below:•

Description of methodology set –https://www.msci.com/index/methodology/latest/ReadMe•

MSCI Corporate Events Methodology –https://www.msci.com/index/methodology/latest/CE•

MSCI Fundamental Data Methodology –https://www.msci.com/index/methodology/latest/FundData•

MSCI Index Calculation Methodology –https://www.msci.com/index/methodology/latest/IndexCalc•

MSCI Index Glossary of Terms –https://www.msci.com/index/methodology/latest/IndexGlossary•

MSCI Index Policies – https://www.msci.com/index/methodology/latest/IndexPolicy•

MSCI Global Industry Classification Standard (GICS) Methodology –https://www.msci.com/index/methodology/latest/GICS•

MSCI Global Investable Market Indexes Methodology –https://www.msci.com/index/methodology/latest/GIMI•

MSCI Global ex Controversial Weapons Indexes Methodology –https://www.msci.com/index/methodology/latest/XCW•

ESG Factors in Methodology*

The Methodology Set for the Index can also be accessed from MSCI’s
webpage https://www.msci.com/index-methodology in the section ‘Search Methodology by Index
Name or Index Code’.
* ‘ESG Factors in Methodology’ contains the list of environmental, social, and governance factors
considered, and how they are applied in the methodology (e.g., selection, weighting or exclusion). It
can be accessed in the Methodology Set as described above.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

Appendix VII: Changes to this Document
The following sections have been modified as of August 2024
Section 3.2: MSCI Monthly Review of Controversies•

Clarified that the monthly review of controversies was applied within the Index effective
January 1, 2024, and is not applicable prior to that date.

Appendix V: Methodology Set•

Added details on the Methodology Set for the Index© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI India ESG Enhanced Focus CTB Select Index | August 2024

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