ESG Scores of 31,000+ Funds Slashed in Major Overhaul by MSCI Amid Growing Criticism
Listen to this articleMSCI Inc. will be lowering the ESG scores of more than 31,000 funds as it overhauls its methodology in response to concerns about inconsistent methodologies used by ESG score providers. MSCI ESG Research will be giving managers of swap-based ETFs six months to provide data on their underlying index constituents to generate ESG scores instead of collateral. The changes take effect at the end of next month, and MSCI expects that only 0.2% of funds will be rated AAA, compared with roughly 20% today. The proportion of BBB-rated funds will rise to roughly 26% from 21%, while 44% of funds will carry an A rating, compared with just over 17% currently.
Key take-aways:
- MSCI Inc. is set to lower the ESG scores of over 31,000 funds in response to concerns about an upward drift in ratings across the fund universe.
- MSCI will be implementing a major overhaul of its methodology, including giving managers of swap-based ETFs six months to provide data on their underlying index constituents to generate ESG scores.
- After the changes, MSCI expects that only 0.2% of funds will be rated AAA, compared with roughly 20% today. The proportion of BBB-rated funds will rise to roughly 26% from 21%, while 44% of funds will carry an A rating, compared with just over 17% currently.
