MSCI Climate Paris Aligned Indexes

Integrating your climate strategy

The Paris Agreement, a legally binding international treaty, gave the world a collective mission: Limit the rise in average temperatures to well below 2°C, but preferably to no more than 1.5°C, above preindustrial levels to prevent the worst effects of climate change.

Our indexes are designed to provide investors with the tools to align their objectives with this goal. They also aim to identify financial risks, such as exposure to stranded assets resulting from divestment, and novel investment opportunities that arise from the transition to a net-zero economy, such as access to new markets with potential to spur growth.

The MSCI Climate Paris Aligned Indexes are designed to:

• Help implement net-zero strategies while maintaining broad market exposure
• Incorporate recommendations of Task Force on Climate-related Financial Disclosures
• Meet requirements of EU Paris Aligned Benchmark

Why MSCI Climate Paris Aligned Indexes?

• Rely on advanced climate analytics data and models, including forward-looking metrics designed to show temperature alignment of investments with global temperature goals
• Built for customization; can be combined with MSCI’s ESG, Sustainable Impact, Factor and Thematic data indexes and sets
• MSCI EU PAB Overlay Indexes available for investors looking for a strict application of EU regulatory minimum requirements

We use an array of advanced, proprietary tools to construct our indexes

• Climate Value-at-Risk

  Model built to provide a forward-looking and return-based valuation assessment to measure climate-related risks and opportunities in portfolios

• Low Carbon Transition Score

  Measure of a company’s exposure to climate transition risks and opportunities reached by aggregating measures of Scope 1, 2 and 3 emissions, avoided emissions and climate management quality

• Barra^® Open Optimizer

  Flexible optimization library used to reduce risk during core portfolio construction while aiming to control for turnover and minimize tracking error

• ITR

  Implied Temperature Rise from MSCI ESG Research is an intuitive, forward-looking metric, expressed in degrees Celsius, designed to show the temperature alignment of companies, portfolios and funds with global temperature goals.

Looking at the Implied Temperature Rise (ITR) and a Paris Aligned Benchmark Together

• Many of the world’s public companies have an Implied Temperature Rise (ITR) of above 1.5°C or 2°C, making it exceedingly difficult for a diversified index to have an ITR of 1.5°C or 2°C at this point in time.
• The index methodology rules for a Paris Aligned Benchmark however, in particular its year-on-year self-decarbonization requirement, are designed to over time get the ITR of the index holdings below 2°C, and eventually to 1.5°C.
• Additionally, starting from June 2024 and specific to the MSCI Climate Paris Aligned Indexes range, constraints on index-level ITR and cumulative projected emissions have been incorporated to further ensure alignment with the 2°C, and 1.5°C, pathways of the Paris Agreement.
• Learn more about ITR constraints in the construction of the MSCI Climate Paris Aligned Indexes

MSCI Climate Paris Aligned Indexes

The indexes follow a transparent and rules-based methodology, which aims to meet the following objectives: