MSCI dominates ESG indices and enjoys long history in the emerging markets
MSCI won Best Index Provider for ESG ETFs and for Emerging Market ETFs in this year’s awards. Paul Riccardella (pictured), Executive Director, Client Coverage, MSCI, explains that MSCI has a long history in both categories.
With respect to ESG, as of the end of August, ETFs linked to MSCI ESG Indexes had USD185 billion in AUM globally. The global ESG space had USD252.5 billion total AUM as of the end of August giving ETFs linked to MSCI ESG indexes 73.3 per cent market share.
Regionally, USD120 billion of the total MSCI linked AUM came from products listed in Europe, while USD61 billion came from products listed in the Americas and the remaining coming from other regions.
Riccardella notes that there has been substantial growth in ESG index usage over the last year, over USD100 billion in new money and while there is a tilt towards European use of ESG indices, the US is catching up fast.
“MSCI is the premier provider to a space that is rapidly growing and becoming much more mainstream” Riccardella says.
“There are a number of different products based on MSCI ESG indexes, some socially responsible so more exclusionary of certain types of industries and business activities, but the bulk of assets are traditional ESG, tilting towards ESG rated companies.”
In terms of new development in the space, the firm has noted the rise of climate-related offerings, particularly in Europe.
The reason for MSCI’s dominance in ESG lies in the fact that the firm creates research and ratings inhouse, Riccardella says. “Our research and ratings business is robust, with ESG scores on more than 10,000 companies globally which gives us a lot of flexibility in terms of catering to clients with very specific needs for high quality data.”
In terms of emerging markets indices, as of the end of August, ETFs linked to MSCI Emerging Markets Indexes had USD269.3 billion in AUM globally. The global Emerging Markets ETF space had USD592.9 billion total AUM as of the end of August giving ETFs linked to MSCI Emerging Markets Indexes 45.4 per cent market share.
“If you think about how the emerging space was created in the 1980s, we were literally one of the first into it with a full suite of emerging market indexes by 1988. We got there early and have been the go-to benchmark for active managers and that same phenomenon translated to index tracking instruments like ETFs.”
Riccardella observes that the biggest trends in indices at the moment are specialty ESG products that are more narrow and focused, with very specific themes or tilts. “Climate change indexes and what we would call thematic or megatrend are where we receive the most enquiries at the moment in the ETF space,” he says.
He believes that what differentiates MSCI is the completeness of the firm’s offering and its track record of innovation over time.