MSCI launches low-carbon indexes that exclude fossil fuel owners

Indexes aimed at institutional investors seeking to eliminate exposure to potentially stranded assets, MSCI says

Index provider MSCI has launched two indexes that exclude or reduce the number of companies that own oil, gas or coal reserves in response to growing demand from investors seeking to lower the carbon footprint of their portfolios, the company says.

The MSCI ACWI ex Fossil Fuels Index completely eliminates exposure to carbon reserves by excluding 127 companies with a combined market cap totaling 9.3 percent of the MSCI ACWI Index, which covers developed and developing markets. The MSCI ACWI ex Coal Index cuts exposure to carbon reserves by 50 percent by eliminating 26 companies that represent 1.3 percent of the market cap of the MSCI ACWI, the company says.

The MSCI Global Fossil Fuels Exclusion Indexes seek to reflect the performance of the market in general while excluding companies with fossil fuel reserves, MSCI says in a press release announcing the launch. The company says institutional investors are increasingly concerned over the possibility of ‘stranded’ assets – fossil fuel reserves that cannot be burned in order to slow the progression of global climate change and switch to a low-carbon economy. The indexes will help them avoid the risks, MSCI says.

‘MSCI developed the MSCI Global Fossil Fuels Exclusion Indexes in response to clear demand from asset owners,’ says Remy Briand, managing director and global head of ESG research at MSCI. ‘These indexes complement the family of MSCI Low Carbon Indexes launched last month as part of a comprehensive suite of tools for investors looking to manage carbon exposure in their portfolios.’

All the MSCI Global Fossil Fuels Exclusion Indexes, which are based on the MSCI ACWI, are free-float adjusted and weighted to market capitalization, MSCI says.

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