Provider of investment decision support tools MSCI has announced the launch of a set of benchmarks to help investors eliminate or reduce fossil fuel investments from their portfolios.
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The MSCI Global Fossil Fuels Exclusion Indexes, a series of free-float adjusted market capitalisation weighted benchmarks, were unveiled on Thursday with the launch of two new indexes.
The first, the MSCI ACWI ex Fossil Fuels Index, reduces carbon reserves exposure by 100%, by excluding 127 securities, representing 9.3% of the parent index market capitalisation. The second, the MSCI ACWI ex Coal Index reduces carbon reserves exposure by 50%, excluding 26 securities, representing 1.3% of the parent index market capitalisation.
MSCI, a leading provider of tools for carbon-concerned investors, say the exclusion indexes were developed in response to the growing body of evidence that suggests fossil fuel assets will be devalued as the fight to stop climate change intensifies.
“MSCI developed the MSCI Global Fossil Fuels Exclusion Indexes in response to clear demand from asset owners,” said Remy Briand, managing director and global head of index and ESG research at MSCI.
“These indexes complement the family of MSCI Low Carbon Indexes launched last month as part of a comprehensive suite of tools for investors looking to manage carbon exposure in their portfolios.”
A growing global divestment movement is calling for investors to ditch fossil fuel firms not just for their environmental impact but also to reduce their exposure to the risk of ‘stranded assets’.
In recent months, authorities and institutions from Oxford City Council to Glasgow University have committed to going fossil fuel free.
Commenting on the launch, Donald Gould, chair of the Investment Committee at Pitzer College in Claremont, California, and president of Gould Asset Management, added, “It is important for those who have decided to divest from fossil fuels to have benchmarks that accurately reflect their investments.
“I am pleased to see MSCI taking important steps in this direction to assist asset managers, consultants and their investor clients.”