What's New In Investments, Funds? - OPIM, MSCI

Editorial Staff

11 July 2019

OPIM
, whose indices guide investors, now rates 32,000 funds according to their risks around environmental, social and governance performance – reflecting the growing noise around ESG investing.

The ratings will apply to funds, including exchange-traded funds, in the equity and fixed income universe, MSCI, aka Morgan Stanley Capital International, said yesterday.

Each fund or ETF scores a rating on a scale from AAA (leader) to CCC (laggard). The rating is based first on the weighted average score of the holdings of the fund or ETF. MSCI then assesses the ESG momentum to gain insight into the fund’s ESG track record. This is designed to indicate a fund’s exposure to holdings with a positive rating trend or worsening trend year-on-year. Finally, MSCI reviews risks to test a fund’s exposure to holdings with worst-of-class ESG fund ratings of B and CCC.

The growth of “passive” investing entities such as ETFs creates challenges for clients who want to tap into environmental, social and governance ideas but without the costs normally associated with actively managed funds. Tools helping investors rank funds are therefore important, MSCI said.