Msci Inc. · NYSE:MSCI
Msci — ESG Presentation (February 2026)
43 slides from Msci's sustainability presentation, February 2026
Slide 1: Consultation on MSCI Climate Paris Aligned PAB Indexes Methodology
Consultation on MSCI Climate Paris Aligned PAB Indexes Methodology February 2026 This consultation may or may not lead to the implementation of any or all of the proposed changes in the highlighted or any other MSCI indexes. Consultation feedback will remain confidential. MSCI may publicly disclose
Slide 2: Introduction: Summary
Introduction Summary MSCI proposes to enhance the MSCI Climate Paris Aligned PAB Indexes methodology to streamline climate objectives and ensure long-term viability. Climate Objectives Long-Term Viability Simplify climate objectives → Mitigate the increase in concentration by removing overlaps, and
Slide 3: Overlapping climate metrics currently address common objectives
Background & Rationale Overlapping climate metrics currently address common objectives.. CLIMATE OBJECTIVES The MSCI Climate Paris Aligned PAB Indexes were launched to holistically address transition risks and Investment in opportunities, while aligning with the Paris Agreement. Alignment Transition
Slide 4: Concentration has increased over the last 3 years
Background & Rationale Concentration has increased over the last 3 years.. The increasing concentration in the MSCI Climate Paris Aligned PAB Indexes raises concerns on the index methodology’s long-term viability. → The trend in concentration may be attributed to: Historical Effective Number of Cons
Slide 5: Index Methodology Principles vs the Proposed Changes
Overview Index Methodology Principles vs the Proposed Changes The MSCI Climate Paris Aligned PAB Indexes would continue to exceed the minimum requirements for EU PABs, under the proposed changes. • GHG Intensity Reduction ≥ 50% vs Parent Index Meets EU PAB • Self-decarbonization ≥ 7% annually (curre
Slide 6: Proposed Enhancements - Overview
Section 1 Proposed Enhancements- Overview Information Classification: GENERAL
Slide 7: Overview of the Current Index Methodology
Recap Overview of the Current Index Methodology Steps Methodology Details Starting Universe MSCI Market Cap Index (“Parent Index”) • ESG Controversies • Oil & Gas Activity • Environmental Controversies • Fossil Fuel Power Generation Exclusions • Tobacco Producers • Tobacco Revenues • Controversial W
Slide 8: Proposed Enhancements (Proposals 1-3)
Proposals – 1 of 2 Proposed Enhancements → Proposals 1-3 aim to streamline the multiple Climate objectives in the current methodology. • The proposed methodology would retain (a) Decarbonization in line with the Paris Agreement, (b) Implied Temperature Rise (ITR) alignment, and (c) Green Revenue % e
Slide 9: Proposed Enhancements (Proposals 4-6)
Proposals – 2 of 2 Proposed Enhancements → Proposals 4-6 aim to safeguard the current and future feasibility of the MSCI Climate Paris Aligned PAB Indexes. Proposals Rationale Simulated Impact • Future-proofing the indexes: As carbon emissions intensity continues to increase in global Proposal 4: Lo
Slide 10: Technical Enhancements
Additional Enhancements Technical Enhancements → In addition to Proposals 1-6, MSCI intends to implement the following technical changes to the index construction and maintenance. Technical Enhancement Rationale i. Quarterly exclusion of companies that • Timeliness: The additional partial rebalancin
Slide 11: Details - Proposals 1-6
Section 2 Details- Proposals 1-6 Information Classification: GENERAL
Slide 12: Proposal 1: Remove Climate Value-at-Risk Objectives
Proposal 1 Proposal 1: Remove Climate Value-at-Risk Objectives Main Proposal: Remove both Aggregate Climate Value-at-Risk1 (CVaR) & Physical CVaR2 Reduction Volatility in Climate VaR: MSCI Japan Index Example Alternate Proposal: Remove Aggregate CVaR & Relax Physical May-22 Nov-22 May-23 Nov-23 May-
Slide 13: Proposal 1 (Main): Remove both Climate Value-at-Risk Constraints
Proposal 1 Proposal 1 (Main): Remove both Climate Value-at-Risk Constraints • Physical Risk CVaR removal would result in higher impact in the World Climate Paris Aligned PAB Index, whereas EM Climate Paris Aligned PAB Index is more constrained by Aggregate CVaR. • Removing both constraints results i
Slide 14: Proposal 1 (Alternate): Remove Aggregate CVaR & Relax Physical Risk CVaR
Proposal 1 Proposal 1 (Alternate): Remove Aggregate CVaR & Relax Physical Risk CVaR • Keeping Physical Risk CVaR at a reduced target of 30% would result in slightly higher tracking error (compared to the main proposal of removing it entirely) but would still improve concentration. Alternative Propos
Slide 15: Proposal 2: Remove Low Carbon Transition Score Objective
Proposal 2 Proposal 2: Remove Low Carbon Transition Score Objective Low Carbon Transition Score (LCT) increase ≥ 10% LCT Score vs GHG Intensity – MSCI USA Index Example 0.9 × Overlaps: Green Revenue % already increases 0.8 exposure to climate solutions enablers, while 0.7 decarbonization constraints
Slide 16: Proposal 2: Remove Low Carbon Transition Score Objective
Proposal 2 Proposal 2: Remove Low Carbon Transition Score Objective • The removal of LCT Score objective would increase the effective Number of Constituents (note that the impact was higher in earlier periods, when its correlation with GHG Intensity was lower). MSCI World Index – Nov 2025 Index Revi
Slide 17: Proposal 3: Remove Companies Setting Targets Objective
Proposal 3 Proposal 3: Remove Companies Setting Targets Objective MSCI World Index – World Climate Removing World Nov 2025 Index Review World Paris Aligned CST Increase EU PAB PAB only Overlay (cumulative impact since June 20202) NOC 1321 461 459 830 Companies Setting Targets Increase ≥ 20% Effectiv
Slide 18: Proposal 4: Reduce the annualized decarbonization target from 10% to 7%
Proposal 4 Proposal 4: Reduce the annualized decarbonization target from 10% to 7% Parent Index emission intensities are increasing in the last 5 yrs Self-decarbonization >= 7% 170% 160% Inflation-Adjusted Scope 1+2+3/EVIC, +8.3% yoy compared to June 2020 baseline • Global Markets are not decarboniz
Slide 19: Proposal 4: Reduce the annualized decarbonization target from 10% to 7%
Proposal 4 Proposal 4: Reduce the annualized decarbonization target from 10% to 7% To illustrate how a lower decarbonization Projecting the MSCI World Climate Paris Aligned PAB Index forward (all else equal) target could improve index viability, the MSCI World Climate Paris Aligned Index 500 5 has b
Slide 20: Proposal 5: Reduce the increase in Green Revenue target to 50%
Proposal 5 Proposal 5: Reduce the increase in Green Revenue target to 50% Green Revenue and Tracking Error Impact: MSCI USA Index Example Green Revenue Increase >= 50% 14 3 12 2.5 × Disproportionate Green Revenue exposure 10 limits diversification: The higher baseline 2 contribution by top names in
Slide 21: Proposal 5: Reduce the increase in Green Revenue target to 50%
Proposal 5 Proposal 5: Reduce the increase in Green Revenue target to 50% • Reducing Green Revenue (from +100% to +50%) would increase the effective number of companies to 74 for the World Index (midway level between the Climate Paris Aligned PAB and EU PAB Overlay Indexes). Tracking error would als
Slide 22: Proposal 6: Introduce a Relaxation Mechanism on the Linear Asset Bounds
Proposal 6 Proposal 6: Introduce a Relaxation Mechanism on the Linear Asset Bounds Linear Active Security Weights at +/-2%, but may be relaxed in steps of 1% up to 10% in cases of infeasibility ✓ Market concentration significantly impacts narrower indexes (such as single-market universes): Security-
Slide 23: Combined Impact – Proposals 1-6
Section 3 Combined Impact – Proposals 1-6 Information Classification: GENERAL
Slide 24: World Index – 10-year Forward Projections
Combined Proposals World Index – 10-year Forward Projections → The combined proposals1 highlight that the index could remain viable until at least 2035 when simulated with stringent assumptions2 • In contrast, the live MSCI World Climate Paris Aligned PAB Index would already reach a 3% tracking erro
Slide 25: World - Key Metrics
Combined Proposals World - Key Metrics Combined Proposal – Combined Proposal – MSCI World Index World Climate Paris Aligned PAB Index World EU PAB Overlay Index Main1 Alternate2 Number of Constituents*** 1491 630 990 961 1092 Effective No. of Consituents 140 110 136 134 137 HHI 113.9 156.8 123.7 124
Slide 26: World – Concentration Impact
Combined Proposals World – Concentration Impact • The combined impact of the proposals1 would bring the level of concentration in the MSCI World Climate Paris Aligned PAB Index closer to that of the MSCI World EU PAB Overlay Index. • Total NOC would increase by about 279 stocks, while Effective NOC
Slide 27: World – Impact on Ex-Ante Tracking Error
Combined Proposal World – Impact on Ex-Ante Tracking Error • Ex-Ante Tracking Error would be reduced by approximately 60 bps, moving closer to that of the MSCI World EU PAB Overlay Index. The “Combined Proposal ” applies Proposals 1-Main, 2, 3, and 5 (Removing CVaR/ LCT/ CST constraints and reducing
Slide 28: World – Impact on Climate Metrics
Combined Proposals World – Impact on Climate Metrics • The combined proposals (main or alternate) would still achieve a 7-8% improvement in LCT Score but would not improve the aggregate increase on companies with SBTi-approved targets. World Climate Paris Combined Proposal – Combined Proposal World
Slide 29: EM Index – 10-year Forward Projections
Combined Proposals EM Index – 10-year Forward Projections → The combined proposals1 highlight that the index could remain viable until at least 2035 when simulated under stringent assumptions2 • The Live Index may reach a tracking error of 3.5% by 2035, whereas the proposals would lower this to only
Slide 30: Emerging Markets - Key Metrics
Combined Proposals Emerging Markets - Key Metrics MSCI EM (Emerging Combined Proposal – Combined Proposal – EM Climate Paris Aligned PAB Index EM EU PAB Overlay Index Markets) Index Main1 Alternative2 Number of Constituents*** 1357 467 796 777 943 Effective No. of Constituents 80 60 77 76 78 HHI 204
Slide 31: Emerging Markets – Concentration Impact
Combined Proposals Emerging Markets – Concentration Impact • The combined impact of the both the Main and Alternate proposals1 would bring the level of concentration in the MSCI EM Climate Paris Aligned PAB Index closer to that of the MSCI EM EU PAB Overlay Index. • Total NOC would increase by 325 s
Slide 32: Emerging Markets – Impact on Ex-Ante Tracking Error
Combined Proposals Emerging Markets – Impact on Ex-Ante Tracking Error • Tracking Error would significantly improve by approximately 100+ bps, moving closer to the level of the MSCI EM EU PAB Overlay Index. The “Combined Proposal ” applies Proposals 1-Main, 2, 3, and 5 (Removing CVaR/ LCT/ CST const
Slide 33: Emerging Markets – Impact on Climate Metrics
Combined Proposals Emerging Markets – Impact on Climate Metrics • The combined proposals (main or alternate) would still achieve a 8-9% improvement in LCT Score but would not improve the aggregate increase on companies with SBTi-approved targets MSCI EM (Emerging EM Climate Paris Combined Proposal –
Slide 34: Consultation Questions and Discussion
Section 4 Consultation Questions and Discussion Information Classification: GENERAL
Slide 35: Consultation Questions – 1 of 2
Client Feedback Consultation Questions – 1 of 2 Proposal 1: Remove the Climate Value-at-Risk objectives (both Aggregate Climate VaR, and Physical Climate VaR) → Do you agree to remove the maximum -5% Aggregate Climate Value-at-Risk (VaR) objective from the methodology? → Do you agree to remove the 5
Slide 36: Consultation Questions – 2 of 2
Client Feedback Consultation Questions – 2 of 2 Proposal 5: Reduce the increase in Weighted Average Green Revenue target to 50% (from 100%) → Do you agree that the methodology should apply a lower increase to Green Revenue companies to mitigate long-term index viability risks? → If yes, do you agree
Slide 37: Discussion Points
Discussion Points Discussion Points Screening Criteria →Do you have a preference to update the screening criteria for Controversial Weapons or Oil & Gas to exactly align with the requirements of the EU Paris Aligned Benchmark (PAB) instead of exceeding these requirements? • Controversial Weapons: co
Slide 38: Appendix
Appendix Appendix Information Classification: GENERAL
Slide 39: Primer – Index Concentration Metrics
Background & Rationale Primer – Index Concentration Metrics → There are a few metrics that measure index concentration. The following metrics were assessed as part of this consultation, with a focus on the Effective Number of Constituents to assess the viability of the proposals. Metric Technical De
Slide 40: Transition Impact – Simulated at the November 2025 Index Review
Combined Proposals Transition Impact – Simulated at the November 2025 Index Review → The transition to the proposed methodology can be implemented in different ways: a. An on-going Index Review at the point of transition: The simulated results under this approach are shown below. The combined propos
Slide 41: Contact
Contact Americas Asia Pacific Europe, Middle East & Africa The process for submitting a formal index United States China South Africa complaint can be found on the index +1 888 588 4567 (toll free) North: 10800 852 1032 (toll free) + 27 21 673 0103 South: 10800 152 1032 (toll free) page of MSCI’s we
Slide 42: About Us: Index
About Us: Index MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and
Slide 43: Notice and Disclaimer
Notice and Disclaimer This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the The Information may contain back tested data. Back-tested performance is not actual performance but is hypothetical. There are “Information”)