This week I want to give a brief overview of what goes into an MSCI ESG rating. All of this comes from public material from MSCI (you can see more detail here).
MSCI is one of the many companies currently offering ESG ratings for public companies. According to MSCI, “MSCI ESG Ratings aim to measure a company’s resilience to long-term, financially relevant ESG risks.” They rate companies on an AAA to CCC scale depending on what exposure they have to ESG risks and how they manage them (AAA and AA are considered leaders; A, BBB, and BB are considered average performers; B and CCC are considered laggards). The expectation is that a company that has significant exposure to a given risk will match that level of exposure with the right management approach.
MSCI as of June 2020 rates 8,500 companies globally, and more than 680,000 securities (both equities and fixed income). On the equity side, MSCI primarily rates issuers included in their MSCI indices. On the fixed income side, the starting point is the Barclays Global Aggregates Indices. It’s important to note MSCI doesn’t conduct solicited ratings.
As for data and processing, they use both artificial intelligence (including AI natural language processing) on public information, as well as ESG analysts to process all data. In sum, they rate and analyze 37 key ESG issues selected annually for each industry. They go through company reports, media reports, and specialized datasets to feed their models.
As of today, the 37 Key ESG Issues they are measuring, include:
Environment: Carbon Emissions, Product Carbon Footprint, Financing Environmental Impact, Climate Change Vulnerability, Water Stress, Biodiversity & Land Use, Raw Material Sourcing, Toxic Emissions & Waste Packaging, Material & Waste, Electronic Waste, Opportunities in Clean Tech, Opportunities in Green Building, Opp’s in Renewable Energy.
Social: Labor Management, Health & Safety, Human Capital Development, Supply Chain Labor Standards, Product Safety & Quality, Chemical Safety, Financial Product Safety, Privacy & Data Security, Responsible Investment, Health & Demographic Risk, Controversial Sourcing, Access to Communications, Access to Finance, Access to Health Care, Opp’s in Nutrition & Health.
Governance Board, Pay, Ownership, Accounting, Business Ethics, Anti-Competitive Practices, Tax Transparency, Corruption & Instability, Financial System Instability.
Depending on the industry, the weights given to each one of these factors will change (as exposure to these factors varies from industry to industry). So, scores are given to individual items, then weighted for pillar scores (one for E, one for S, one for G), and then weighted for the final score. That score is normalized by industry, and then a rating is provided.
The ratings we could find for Mexican corporates on MSCI’s website are:
· America Movil – B rating, laggard in the telecommunication services industry
· ASUR – BBB rating, average in the transportation infrastructure industry.
· Banorte – A rating, average in the banks industry
· Becle – B rating, laggard in the beverages industry
· FUNO – B rating, laggard in the real estate management & services industry
· GAP – B rating, laggard in the transportation infrastructure industry
· Gruma – BB rating, average in the food products industry
· Grupo Mexico – CCC rating, laggard in the metals and mining – non-precious metals industry.
· IENOVA – AA rating, leader in the utilities industry
· Inbursa – BB rating, average in the banks industry
· Kimber – BBB rating, average in the household & personal products industry
· KOF – A rating, average in the beverages industry
· Megacable – CCC rating, laggard in the media & entertainment industry
· Orbia – CCC rating, laggard in the commodity chemicals industry
· Peñoles – BB rating, average in the metals & mining – precious metals industry
· PINFRA – B rating, laggard in the transportation infrastructure industry
· Walmex – A rating, average in the retail – food & staples industry
There is much more analysis into what an MSCI ESG rating entails, and as we’ve said in the past, we recommend really knowing what goes into any rating before using it for an ESG integration process. However, MSCI ESG Research has become one of the most widespread rating agencies in the ESG world, and we believe it is worth knowing at least the basics about it.
Marimar
Partner, Miranda ESG
Contacts in Miranda Partners
Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com
Marimar Torreblanca
Miranda ESG
marimar.torreblanca@miranda-partners.com
Esta semana quisiera dar una breve introducción a qué es lo que hay en las calificaciones de MSCI ESG. Todo esto viene de materiales públicos de MSCI (puedes ver más detalle si te interesa aquí).
MSCI es una de las varias empresas que actualmente ofrecen calificaciones de ESG para empresas públicas. De acuerdo con MSCI, sus calificaciones pretenden medir la resiliencia de las empresas a riesgos de ESG financieramente relevantes en el largo plazo. Califican empresas en una escala de AAA a CCC, dependiendo en qué tan expuestos están a ciertos riesgos ESG, y qué tan bien manejan esta exposición (AAA y AA se consideran líderes; A, BBB y BB se consideran promedio; B y CCC se consideran rezagados). La expectativa es que una empresa con un nivel de exposición significativo a un riesgo va a compensar la exposición con un sistema de gestión fuerte.
A junio 2020, MSCI califica 8,500 empresas a nivel global, y más de 680,000 instrumentos (tanto de capitales como de renta fija). Por el lado de capitales, MSCI principalmente califica emisoras que están ya incluidas en sus índices. Para renta fija, el punto de arranque son los índices de Barclays Global Aggregates. Es importante notar que MSCI no hace calificaciones solicitadas por las propias empresas.
En cuanto a los datos y el procesamiento de los mismos, MSCI usa tanto inteligencia artificial (incluyendo técnicas de proceso de lenguaje de IA) en información pública, como analistas de ESG para procesar datos. En total, califican y analizan 37 factores clave de ESG que se seleccionan de manera anual. Revisan reportes de las empresas, reportes en medios, y bases de datos especializados para alimentar sus modelos.
Al día de hoy, los 37 factores clave de ESG que están midiendo son:
Environment: Carbon Emissions, Product Carbon Footprint, Financing Environmental Impact, Climate Change Vulnerability, Water Stress, Biodiversity & Land Use, Raw Material Sourcing, Toxic Emissions & Waste Packaging, Material & Waste, Electronic Waste, Opportunities in Clean Tech, Opportunities in Green Building, Opp’s in Renewable Energy.
Social: Labor Management, Health & Safety, Human Capital Development, Supply Chain Labor Standards, Product Safety & Quality, Chemical Safety, Financial Product Safety, Privacy & Data Security, Responsible Investment, Health & Demographic Risk, Controversial Sourcing, Access to Communications, Access to Finance, Access to Health Care, Opp’s in Nutrition & Health.
Governance Board, Pay, Ownership, Accounting, Business Ethics, Anti-Competitive Practices, Tax Transparency, Corruption & Instability, Financial System Instability.
Dependiendo de la industria, los pesos dados a cada factor cambian (dado que la exposición a ellos cambia de una industria a otra). Entonces, se dan calificaciones a factores individuales, se hace un promedio ponderado para cada uno de los pilares (E, S, G), y de ahí se hace otra ponderación para una calificación numérica final. La calificación se normaliza por industria, y de ahí sale la letra (o rating).
Las calificaciones públicamente disponibles que vimos en su página para empresas mexicanas son:
· America Movil – B rating, laggard in the telecommunication services industry
· ASUR – BBB rating, average in the transportation infrastructure industry.
· Banorte – A rating, average in the banks industry
· Becle – B rating, laggard in the beverages industry
· FUNO – B rating, laggard in the real estate management & services industry
· GAP – B rating, laggard in the transportation infrastructure industry
· Gruma – BB rating, average in the food products industry
· Grupo Mexico – CCC rating, laggard in the metals and mining – non-precious metals industry.
· IENOVA – AA rating, leader in the utilities industry
· Inbursa – BB rating, average in the banks industry
· Kimber – BBB rating, average in the household & personal products industry
· KOF – A rating, average in the beverages industry
· Megacable – CCC rating, laggard in the media & entertainment industry
· Orbia – CCC rating, laggard in the commodity chemicals industry
· Peñoles – BB rating, average in the metals & mining – precious metals industry
· PINFRA – B rating, laggard in the transportation infrastructure industry
· Walmex – A rating, average in the retail – food & staples industry
Hay mucho más análisis necesario para entender lo que va dentro de una calificación MSCI ESG. Como hemos dicho en el pasado, recomendamos realmente entender qué entra en cualquier calificación antes de usarla en un proceso de integración ESG. Sin embargo, MSCI ESG Research se ha convertido en una de las agencias calificadoras más extendidas para ESG, y por ello creemos que por lo menos vale la pena saber los datos básicos de su metodología.
Marimar
Partner, Miranda ESG
Contactos en Miranda Partners
Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com
Marimar Torreblanca
Miranda ESG
marimar.torreblanca@miranda-partners.com
