1、MSCI ESG Research LLCESG and Climate Trends to Watch for Welcome to MSCIs ESG and Climate Trends to Watch for 2023.Were heading into the new year against a backdrop of a major war in Europe,inflation,cost-of-living crises,energy markets in turmoil,rising interest rates,pandemic fatigue,political unc

2、ertainty and what feels like an unending stream of climate-induced disasters.At the same time,ESG itself is being put under the spotlight.Regulators around the world are upping the ante on everything from greenwashed fund names to stricter climate target disclosures,while the very idea of ESG invest

3、ing is increasingly politicized.Which is to say:Theres a lot going on around the world.And it is shaping both the investment environment and the challenges and opportunities facing companies.Now,if youre a longtime fan of our annual ESG trends research,youll notice things look a little different thi

4、s time.The large-scale trends shaping the ESG-investing world are well-known at this point:climate change risk and the road to net-zero,the growing existential threat of biodiversity loss,social inequalities,regulation and,lately,debate and controversy over what exactly ESG should be.So this year,we

5、ve gone back to basics and asked the experts on our research team:With everything that is happening around us,what specifically will you be watching in 2023,and why?The following pages contain a selection of the answers to that question.Not surprisingly,many touch on climate change across a variety

6、of angles:from carbon credit funds to insured emissions,and from scrutiny of net-zero targets to decarbonizing industrial real estate.Regulation is now top of mind not just in the EU,but increasingly in the U.S.and APAC markets:from requirements for financial institutions to conduct climate stress t

7、ests,to deforestation-free market-access rules,to investors getting ahead of potentially mandatory requirements to report on the SFDRs Principle Adverse Impact indicators.Our team also has their eyes on supply chain issues,including the prospects for lab-grown commodities,tracking goods through bloc

8、kchain technology and the mining of e-waste to reshape the dynamics of controversial raw material sourcing.And to round it off,weve got a host of issues affecting everyday lives in what seem to be increasingly difficult times:striking rail workers(were looking at you,U.K.),poor air quality,new groun

9、d rules for internet companies and more.We hope youll dive in,make yourself at home and come away with some fresh,and in-depth,perspectives.What will you be watching in 2023?Meggin Thwing EastmanGlobal ESG Editorial Director,ESG Research Director,EMEA LondonChanging governance1.Market conditions cou

10、ld test investors commitment to say-on-climate voting2.Will climate-focused boards help improve emissions trajectories?3.As Asian companies add female directors,human capital could benefit 4.As boards age,whats the trade-off between experience and youth?Responses to regulation5.Regulators turn their

11、 gaze to ESG funds 6.Climate target disclosure standards:Regulatory inconsistencies remain 7.Will banks be ready for climate stress test regulations?8.ESG ratings may fill in some blanks for Principal Adverse Impact indicators 9.Cutting deforestation:Market restrictions get real 10.Beyond GDPR:New r

12、egulations could alter the global digital landscapeInnovations in the supply chain11.Cottons crunch point and the future of fiber12.Mining old electronics to fuel new energy tech 13.GMO regulatory resistance may be softening 14.Can blockchain help supply chains move away from controversy?Work life15

13、.Ill be working on the railroad Not?16.Choking on smoke:human capital risks from air pollution 17.News shifts from pandemic to climate change,but labor hangs on 18.Bargaining with labor:Managing worker shortages in hard times 579111315171921232527293133353739ClimateWorkforce InvestmentRegulationBiod

14、iversityGovernanceSupply chain 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 3 Research InsightsMSCI ESG Research LLCContents 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 4 Rese

15、arch InsightsMSCI ESG Research LLCTurning points19.Is the honeymoon over for green bonds?20.Sovereign policy dilemma:Energy security vs.the clean-energy transition 21.Energy crisis,Ukraine war driving fossil fuel agenda,but dont rule out renewables 22.Nuclear energy contemplates a comeback 23.Patent

16、 activity suggests energy firms still dig fossil fuels New frontiers in measurement and transparency24.Pulling back the veil on banks loan emissions 25.Insurance emissions:the actuarial revolution has begun 26.Emissions attribution could help keep portfolios aligned with net-zero27.Net-zero:Companie

17、s are aiming high,but are their strategies practical?New investments28.Lab-grown commodities:the new frontier?29.Turning steel green(er)with blast furnace upgrades 30.Greening industrial real estate one warehouse at a time 31.New risks and opportunities in climate adaptation32.Investing in emissions

18、:carbon as a new asset class?ClimateWorkforce InvestmentRegulationBiodiversityGovernanceSupply chainThis document is research for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information.Not

19、hing herein is intended to promote or recommend any product,tool or service.For all references to laws,rules or regulations,please note that the information is provided“as is”and does not constitute legal advice or any binding interpretation.Any approach to comply with regulatory or policy initiativ

20、es should be discussed with your own legal counsel and/or the relevant competent authority,as needed.4143454749515355575961636567Research InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 5 Florian SommerLondonMar

21、ket conditions could test investors commitment to say-on-climate votingMore investors voted against corporate climate strategies in the 2022 proxy season compared to 2021,according to our analysis below.We found that investors tended to vote against climate plans in 2022 where the companys emissions

22、 trajectory was misaligned with global temperature targets,as measured by MSCI Implied Temperature Rise(ITR).1 Recent turmoil in energy markets and a focus on energy security may change some investors voting behavior.2 In 2023,we will be watching whether investor opposition to corporate climate stra

23、tegies will continue to increase,or whether more investors will give companies the benefit of the doubt on their climate plans in challenging market conditions.We identified 53 constituents of the MSCI ACWI Investable Market Index(IMI)that held management-sponsored votes on their climate plan in the

24、 last two years.3 Investors approved all these corporate climate strategies,mostly by large majorities.However,the average proportion of votes against went from 3.1%in 2021 to 9.6%in 2022,indicating increasing uneasiness among some investors.Our analysis of the limited number of votes in 2022(43 com

25、panies)suggests that many dissenting investors may have opposed corporate climate strategies that they felt were not ambitious enough.With more say-on-climate votes scheduled for 2023,we will be watching whether or not this dynamic will hold.David MuirheadLondonClimateGovernanceChanging governanceTA

26、BLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 6 Companies emissions trajectories and 2022 say-on-climate vote resultsAnalysis covers all 43 constituents of the MSCI ACWI IMI that held m

27、anagement-sponsored say-on-climate votes in 2022 to date.The percentage of votes against accounts for votes in favor and votes withheld/abstained.Data as of Nov.9,2022.Source:MSCI ESG Research and company disclosures1 MSCI Implied Temperature Rise is designed to show the temperature alignment of com

28、panies,portfolios and funds with global climate targets.It compares a companys current and projected greenhouse-gas emissions across all emission scopes with its share of the remaining global carbon budget for keeping global warming well below 2C.It converts a companys“undershoot”or“overshoot”of its

29、 carbon budget to an implied rise in average global temperatures this century,expressed in degrees Celsius.2 Masters,Brooke.“Shareholders back away from green petitions in US proxy voting season.”Financial Times,July 1,2022.3 Votes in either 2021 or 2022,data as of Nov.9,2022.Changing governanceRese

30、arch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 7 Investors are increasingly showing themselves willing to challenge board directors on their companies climate performance,including scrutinizing climate ris

31、k management disclosures or emissions-reduction plans in some markets.4 In 2023,we will be watching whether climate-focused boards help emissions-intensive companies stand up to that scrutiny.A recent study found that U.K.-listed companies with better governance practices tended to achieve higher ca

32、rbon-emissions reduction compared to historic levels and to industry peers.5 If this holds more widely,boards that spend significant time on environmental or sustainability issues and include directors with climate experience could help firms address climate transition risk and reduce real-world emi

33、ssions.Specifically,dedicated environmental or sustainability committees may focus director attention on climate-related issues.Boards that include climate-savvy directors may be better able to build support for emissions targets,compared to those that do not.These factors could help companies respo

34、nd to questions from investors about their approach to climate change.To explore these issues,we looked at board practices at a group of climate laggards:38 constituents of the MSCI ACWI Index in emissions-intensive industries that were strongly misaligned with global temperature targets as of Novem

35、ber 2022,as measured by MSCI Implied Temperature Rise(ITR).6 In the exhibit below,the seven companies highlighted in green had a board sustainability committee and at least one director with climate-related experience,based on our analysis.7 Their future emissions trajectories may answer whether cli

36、mate-focused boards can help companies align with global temperature targets.Will climate-focused boards help improve emissions trajectories?David MuirheadLondonFlorian SommerLondonClimateGovernanceChanging governanceTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer

37、at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 8 Climate board practices at select emissions-intensive companiesAnalysis covers 38 constituents of the MSCI ACWI Index with an ITR above 3.2C.Under the Global Industry Classification Standard(GICS),these companies were

38、classified in these sub-industries:independent power producers and energy traders,electric utilities and construction materials.These three sub-industries were the most emissions-intensive GICS sub-industries,based on our data for fiscal year 2020.GICS is the global industry classification standard

39、jointly developed by MSCI and S&P Global Market Intelligence.Source:MSCI ESG Research and company disclosures(as of November 2022)4 Verney,Paul.“Resolution round-up:Investors to target directors at climate laggards,ISS poll suggests.”Responsible Investor,Oct.18,2022.5 Luo,Le,and Tang,Qingliang.2021.

40、“Corporate governance and carbon performance:role of carbon strategy and awareness of climate risk.”Accounting&Finance 61:2891-2934.6 Please see the note below the accompanying chart for more details about these companies.ITR is designed to show the temperature alignment of companies,portfolios and

41、funds with global climate targets.It compares a companys current and projected greenhouse gas emissions across all emission scopes with its share of the remaining global carbon budget for keeping global warming well below 2C.It converts a companys“undershoot”or“overshoot”of its carbon budget to an i

42、mplied rise in average global temperatures this century,expressed in degrees Celsius.7 We identified environmental or sustainability committees based on official board committee names.Our evaluation of climate-related director experience is based on a review of disclosed director biographies.Changin

43、g governanceResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 9 When analyzing companies and their board composition,we have previously observed a correlation between the presence of female directors and

44、strong talent-management practices,as well as higher growth in employee productivity.In 2023,well be watching whether the APAC regions regulatory efforts to increase the presence of women on boards also manifests in improvement of companies human capital management.Malaysia introduced a 30%-female-d

45、irector recommendation in its corporate governance code in 2017,and India strengthened gender-diversity requirements in 2020 to include an independent female director at the top 1,000 companies based on market cap.8 While India had previously mandated the appointment of one female director,there was

46、 criticism that companies were meeting the requirement with female relatives of controlling shareholders and senior managers.9 Generally,independent directors should help enhance management oversight and protect the interests of non-majority shareholders,while the requirement for an independent fema

47、le director could also help improve talent-management practices.Most recently,large Korean companies scrambled to appoint at least one female director ahead of a new board-diversity regulation that came into effect in August 2022.10 Given the prevalence of controlled companies and family firms11 in

48、APAC,12 many new female directors will likely come from connected interests,but we would also expect the number of independent female directors to increase.Will regulatory efforts have the desired effect?While not necessarily evidence of causality,the exhibit below shows that,on average,companies wi

49、th at least one female director had higher human-capital-management performance than those without any female directors(4.3 vs.3.7 on a 0-10 scale).13 The difference was even greater at companies that had at least three female directors or 30%women on the board,a potential“tipping point.”We will be

50、watching whether this relationship holds as regulatory pressure intensifies,and whether other markets will follow Indias example to incorporate aspects of independence in the push to increase board diversity.As Asian companies add female directors,human capital could benefitMoeko PorterTokyoSK KimSe

51、oulWorkforce GovernanceChanging governanceTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 10 Human-capital management at companies with female directorsAmong the constituents of the MSC

52、I Emerging Markets Investable Market Index(IMI),we selected APAC companies with labor management or human capital development as a weighted key issue in the MSCI ESG Ratings model:China(n=529),India(n=139),Indonesia(n=29),South Korea(n=328),Malaysia(n=65),Philippines(n=21),Taiwan(n=103)and Thailand(

53、n=45).The MSCI Emerging Markets IMI(n=3,064)captures large-,mid-and small-cap representation across 24 emerging markets.Data reflects the distribution of management scores under our human-capital-development key issue for companies with varying levels of female-director representation.Data as of Oct

54、.25,2022.Source:MSCI ESG Research8“Malaysian Code on Corporate Governance(As at 28 April 2021).”Securities Commission Malaysia,April 28,2021.“Securities and Exchange Board of India(Listing Obligations and Disclosure Requirement)Regulations,2015.”Securities and Exchange Board of India,July 25,2022.9

55、Singh,Gagandeep.2020.“Corporate Governance:An Insight into the Imposition and Implementation of Gender Diversity on Indian Boards.”Indian Journal of Corporate Governance 13:99110.10 Korean companies listed in the KOSPI index,with total assets greater than KRW 2 trillion are required to appoint at le

56、ast one female director as of August 2022.11 MSCI ESG Research considers a company where the largest shareholder or shareholder group holds 30%or more of the voting rights a controlled company,and considers a company a family firm when the family holds 10%or more of the voting rights and at least on

57、e seat on the board of directors.12 Porter,Moeko.“Keeping it in the Family.”MSCI Research Insight,Sept.17,2022.(Client access only.)13 Human-capital-management performance refers to average key issue score for the labor-management and human-capital-development key issues under the MSCI ESG Ratings m

58、ethodology.Changing governanceResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 11 The average age of newly appointed directors is on track to hit a record high next year,with first-time male directors in

59、 developed markets approaching 60.But women and emerging-market directors are younger.Amid ongoing global demographic shifts,in 2023 well be watching how nomination committees consider the potentially significant implications of age for director skill sets,as well as for board continuity and diversi

60、ty.The average age of new directors for constituents of the MSCI ACWI Index has risen from 54.8 years in 2018 to 56.3 years in 2022.Globally,significant age gaps exist between male and female directors and between those who serve on the boards of companies in developed and emerging markets.14 When c

61、ombined,these trends are amplified.This may mean companies in emerging markets have an edge when harnessing new technologies and pursuing business innovation:Younger directors may enhance a boards generational diversity and help companies chart a path forward in an increasingly complex and technolog

62、y-dependent business environment.However,boards and their nomination committees will require strong onboarding programs to maximize the contributions of younger directors who are likely to bring fewer years of professional experience and who may be less familiar with the nuances of board work.15 Add

63、itionally,nomination committees may need to monitor how new directors affect board-age diversity to ensure an appropriate balance.Boards seeking younger talent may also be forced to consider these directors other commitments:They are more likely to be full-time employees at other companies,which cou

64、ld limit their capacity for board work.16 Meanwhile,nomination committees for developed-market boards with an abundance of older men may need to take a fresh look at their approach to director recruiting and consider diversifying their director-age demographics to bring wider perspectives to board d

65、iscussions.Tanya MatandaTorontoAs boards age,whats the trade-off between experience and youth?Harlan TuffordTorontoGovernanceChanging governanceTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.CO

66、M|Page 12 14 Market classifications are based on the MSCI Market Classification Framework,July 2022.15“Directors Responsibilities in Canada.”Osler,Hoskin&Harcourt LLP and the Institute of Corporate Directors,Oct.1,2014.16“Episode 58:How do we get more young people serving in the boardroom.”Future Di

67、rectors Podcast,March 1,2021.Constituents of MSCI ACWI Index,as of Oct.18,2022.MSCI ACWI Index constituents(n=2,625),developed-market constituents(n=1,397)and emerging-market constituents(n=1,228).Includes directors who joined a board in the 12 months prior to Oct.18 in each year.Source:MSCI ESG Res

68、earchAverage age of new directors by market and genderChanging governanceResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 13 RegulationFor much of the past decade,ESG-oriented funds have operated with li

69、mited regulatory guidance.17 But that looks to be rapidly changing.Regulatory interest in fund names and funds classification and disclosure obligations are ramping up globally.Spearheaded by the EUs Sustainable Finance Disclosure Regulation(SFDR),which imposes requirements on more transparent repor

70、ting for ESG funds,other major market regulators are following suit.In 2023,well be watching for changes in ESG fund names and labels as unfolding disclosure regimes hold managers to stricter account.Australia,Hong Kong and Singapore,for example,have provided guidance to standardize disclosures on t

71、he integration of ESG factors in the investment-selection process.Regulators in the EU and Canada have gone further by seeking to classify sustainable funds,with more extensive ESG integration requiring more disclosure.The U.S.has taken tentative steps with a similar but not directly comparable prop

72、osal,a significant move for the worlds largest fund market(representing over 60%of global fund investments).If these collective proposals take effect,they could see USD 3.6 trillion of sustainable investments(8%of global fund assets)subject to oversight.For investors,this could mean better-informed

73、decisions.But it could also lead to the emergence of a multitude of disconnected regional standards for ESG-fund classifications,a challenge for investors in pursuit of a common ESG objective across jurisdictions.Regulators turn their gaze to ESG fundsSita SubramanianNew YorkRumi MahmoodLondonInvest

74、mentResponses to regulationTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 14 Jurisdictions with active and proposed regulations or guidelines for ESG fundsSolid text boxes represent re

75、gulations in force,while dashed boxes represent proposed or planned regulations.List of jurisdictions with regulations or guidelines proposed or in force for ESG funds:U.S.(proposed);Canada;EU;U.K.(planned);Singapore;India(proposed);Hong Kong;Australia(including Section 1013DA);Malaysia;New Zealand;

76、Philippines(proposed);Thailand(proposed);Taiwan.Data as of Oct.12,2022.Source:MSCI ESG Research17 ESG funds are defined as any fund that employs any ESG considerations in its security-selection process(values and screening/ranking/exclusions/integration/optimization,etc.,and their combinations).In s

77、implest terms,it is the widest possible net under which any and all funds employing any ESG considerations in security selection are captured.All fund characterizations based on data from Broadridge and MSCI ESG Research,as of July 2022.Responses to regulationResearch InsightsMSCI ESG Research LLC 2

78、022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 15 Investors need comparable,consistent and meaningful information to make decisions.A 2022 survey by the Task Force on Climate-related Financial Disclosures(TCFD)identified consistent reporting

79、 of climate targets as one of the biggest areas for companies to improve.18 Yet,despite the efforts to create common reporting standards across jurisdictions,differences persist.Regulatory misalignment on climate targets could mean critical data gaps remain,leading to continued difficulty in assessi

80、ng and comparing corporate pledges.In 2023,we will be watching to see how climate target disclosure frameworks move toward implementation:with further convergence and consistency or added fragmentation?In 2022,we saw the proposed drafts of the“big three”climate disclosure standards from the Internat

81、ional Sustainability Standards Board(ISSB),the European Financial Reporting Advisory Group(EFRAG)and the U.S.Securities and Exchange Commission(SEC).We assessed the extent to which the big three measured up against a set of key target factors,which in our view represent the essential information nee

82、ded for a comprehensive disclosure of a companys climate targets.This includes data points we assess as part of the MSCI Climate Target Scorecard,which collects information on companies targets and converts it into a standardized framework to allow for better comparison.In our assessment,we found:Th

83、e European Sustainability Reporting Standards(ESRS),proposed by the EFRAG,are the most detailed,asking companies to report fully on 11 of the 12 areas we assessed.All three frameworks require the disclosure of basic target information such as target year and type(i.e.,absolute or intensity-based).Ho

84、wever,neither the ISSB nor the SEC ask companies to fully report on more detailed measures such as whether or not their targets align with science-based criteria.Only one of the three standards asks companies to specify the coverage of emissions subject to the target(coverage ratio of scope).When it

85、 comes to expressing the percentage change from the baseline,the regulations leave space for companies to not disclose.While some advances have been made toward more consistent and more comparable climate disclosure standards,this clearly remains a work in progress.Climate target disclosure standard

86、s:Regulatory inconsistencies remainEmma Zhe WuShanghaiZohir UddinLondonClimateRegulationResponses to regulationTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 16 Data as of November 202

87、2.Source:MSCI ESG ResearchGaps in alignment between the proposed big three disclosure frameworks on climate targets18“2022 Status Report.”Task Force on Climate-related Financial Disclosures,October 2022Responses to regulationResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Pl

88、ease refer to the disclaimer at the end of this document.MSCI.COM|Page 17 An increasing number of authorities across the world are requiring financial institutions to conduct climate-risk stress tests,with more likely to follow.Yet our analysis of banks across jurisdictions with existing or planned

89、requirements for climate stress tests found that,while some banks were better placed than others,none could claim to be fully prepared(see exhibit below).In 2023,well be watching which banks can rise to the challenge of developing climate-risk data and modeling capacities to meet the demands of regu

90、latory climate stress tests.Understanding the exposure of a banks balance sheet to climate-related risks has become increasingly important and not just for the 117 signatories to the Net Zero Banking Alliance,with a combined USD 70 trillion in assets,that are working to transition their lending and

91、investment portfolios to net-zero.In at least 18 jurisdictions,banks already are or soon will be subject to regulatory climate stress tests.19 Recent climate stress tests conducted by the European Central Bank(ECB),Bank of England,Hong Kong Monetary Authority and Bank of Canada found that:20 1.Secto

92、r-level climate-risk credit-modeling capabilities and the allocation of income and exposures by sector/country and by emission intensity remained a major challenge,with fewer than 10%of banks assessed by the ECB using sufficient forward-looking and granular climate-risk information in risk-managemen

93、t practices.21 2.Addressing data gaps particularly those related to Scope 3 emissions and the climate-related transition plans of customers and counterparties will be critical for understanding the full picture of climate-risk exposure.3.Uncertainty around the timing of the materialization of climat

94、e-related risks and the lack of historical data are hindering the development and validation of climate risk models.With or without net-zero targets,coming regulations mean that banks need to be able to quantify the exposure of their balance sheets to climate-related risks going forward.Remediating

95、the climate-related data and modeling shortfalls exposed by climate stress tests to date will be paramount.Will banks be ready for climate stress test regulations?Sita SubramanianNew YorkSimone Ruiz-VergoteFrankfurtAnqi LiangFrankfurtClimateRegulationResponses to regulationTABLE OF CONTENTS 2022 MSC

96、I Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 18 Y-axis indicates jurisdiction(number of banks included in analysis shown in brackets).The exhibit shows the number of banks disclosed as having conducted climat

97、e-risk analysis in each of the four categories in each selected jurisdiction.The EU includes multiple member states,many of which have also announced regulatory climate stress tests.Analysis includes banking-industry constituents of the MSCI ACWI Index as of Oct.30,2022.The banking industry is defin

98、ed according to the Global Industry Classification Standard(GICS),which is the industry-classification standard jointly developed by MSCI and S&P Global Market Intelligence.Source:MSCI ESG ResearchBanks performance on disclosed climate risk analysis indicators19“Scenarios in Action.A progress report

99、 on global supervisory and central bank climate scenario exercises.”Network for Greening the Financial System,Oct.19,2021.“Federal Reserve Board announces that six of the nations largest banks will participate in a pilot climate scenario analysis exercise.”Federal Reserve Board,Sept.29,2022.20“2022

100、climate risk stress test.”European Central Bank Banking Supervision,July 7,2022.“Results of the 2021 Climate Biennial Exploratory Scenario(CBES).”Bank of England,May 24,2022.“Pilot Banking Sector Climate Risk Stress Test.”Hong Kong Monetary Authority,Dec.30,2021.“Using Scenario Analysis to Assess Cl

101、imate Transition Risk.Final Report of the BoC-OSFI Climate Scenario Analysis Pilot.”Bank of Canada and Office of the Superintendent of Financial Institutions,Jan.14,2022.21“Walking the talk.Banks gearing up to manage risks from climate change and environmental degradation.Results of the 2022 themati

102、c review on climate-related and environmental risks.”European Central Bank Banking Supervision,Nov.1,2022.Responses to regulationResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 19 In the coming year,fin

103、ancial-market participants subject to the EUs Sustainable Finance Disclosure Regulation(SFDR)must begin reporting Principal Adverse Impact indicators(PAIs)the negative environmental or social impacts associated with their portfolio holdings,and from 2024 they will also need to report year-on-year ch

104、anges.But companies themselves will not have to report PAIs until 2024.In 2023,we will be watching how asset managers try to bridge the gap between scarce PAI data and an urgent need to monitor and manage their exposure.A sustainable investment,as defined by SFDR Article 2(17),should not cause signi

105、ficant harm under any of the mandatory PAIs.Under the revised Markets in Financial Instruments Directive(MiFID II)rules,consideration of PAIs in portfolio construction is one way to serve an investors sustainability preferences.22 Given data issues for some PAIs and the widespread adoption of ESG ra

106、tings in investment processes,it is possible that asset managers will leverage them to proxy the PAIs of their portfolios.While that is not the intended purpose of ESG ratings,could they prove to be a useful guide while we wait for more complete corporate disclosures?In a case study where we increas

107、ed a hypothetical portfolios weighted average MSCI ESG Rating by 20%through portfolio optimization,we found that most weighted average PAIs decreased,and data coverage improved.23 It may be that companies that better managed ESG issues also tended to better manage,and disclose,a wider range of exter

108、nal impacts.Portfolio PAIs only scale the holdings of constituents with available data;and where data coverage is low,such PAIs are not purposeful for comparing different portfolios.Still,for asset managers looking to manage PAI exposure,ESG ratings might provide a useful starting point until more e

109、xtensive corporate reporting rules come into force in the EU and elsewhere.ESG ratings may fill in some blanks for Principal Adverse Impact indicatorsYuliya FerencFrankfurtRegulationInvestmentResponses to regulationSimone Ruiz-VergoteFrankfurtTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Pleas

110、e refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 20 Using MSCI ESG Ratings as a proxy to improve PAI metricsThe MSCI ESG Ratings coverage universe encompassed 8,198 issuers as of June 2022.The optimization was designed to achieve a 20%improvem

111、ent in the MSCI ESG Score over that of the coverage universe,from 6.3(MSCI ESG Rating A)to 7.3(MSCI ESG Rating AA),while retaining the same GICS sector allocation as in the coverage universe.The optimized hypothetical portfolio contained 1,902 stocks.Source:MSCI ESG Research22“Commission Delegated R

112、egulation of 21.4.2021 amending Delegated Regulation(EU)2017/565 as regards the integration of sustainability factors,risks and preferences into certain organisational requirements and operating conditions for investment firms.”European Commission,April 21,2021.23 This section contains analysis of h

113、istorical data,which may include hypothetical,backtested or simulated performance results.A different set of assumptions from the one described here may produce different results.There are frequently material differences between back tested or simulated performance results and actual results subsequ

114、ently achieved by any investment strategy.The analysis and observations in this section are an example for illustrative purposes only and are limited solely to the period of the relevant historical data,backtest or simulation.Past performance whether actual,backtested or simulated is no indication o

115、r guarantee of future performance.None of the information or analysis herein is intended to constitute investment advice or a promotion of any product or a recommendation to make(or refrain from making)any kind of investment decision or asset allocation and should not be relied on as such.91%Respons

116、es to regulationResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 21 RegulationDespite COP26 commitments to halt and reverse forest loss,24 2021 saw tree-cover loss of 25.3 million hectares globally,an ar

117、ea larger than Great Britain.The Amazon alone lost an area equal to the size of Northern Ireland.25 In addition,the summer of 2022 saw a wave of wildfires around the globe,burning down millions of hectares more.COP1526 is scheduled to address such natural capital losses,while the European Parliament

118、 recently voted in favor of stringent new regulation that would require all products sold in the EU to be deforestation-free.In 2023,well be watching which companies with high deforestation exposure can improve their due diligence and supply-chain monitoring programs as they seek to maintain access

119、to key markets.Under the proposed regulation,the EU will not accept products made or based on land that was deforested after the end of 2019.27 This should reduce its deforestation footprint and would significantly increase regulatory pressure for companies with EU market exposure.Palm oil,soy,timbe

120、r and beef production are the main drivers of deforestation.28 But the regulation isnt limited to these obvious suspects.Leather car seats,rubber used for clothing and printed paper products are among other goods affected producers and distributors here may need to take action as well.Based on our a

121、nalysis,however,the level of preparedness does not appear to be high.Only 11.7%of listed food-products companies and 18.2%of food retailers had disclosed a deforestation policy,while the numbers for auto components(3.3%)and textiles,apparel and luxury goods(3.7%)were even lower.29 Even at paper and

122、forest products companies the figure was below 40%.And policies are only a first step eliminating products rooted in deforested land from a supply chain is typically a major endeavor requiring extensive due diligence.Complying with the new regulation may therefore require significant efforts on the

123、part of companies.Firms that have been thinking of deforestation as an issue for somebody else or someday down the road may have to get a handle on it and in a hurry.Cutting deforestation:Market restrictions get realArne KlugFrankfurtClimateBiodiversityResponses to regulationTABLE OF CONTENTS 2022 M

124、SCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 22 24“Glasgow Leaders Declaration on Forests and Land Use.”UN Climate Change Conference UK 2021,Nov.2,2021.25 University of Maryland and World Resources Institut

125、e.“Global Primary Forest Loss.”Accessed Oct.12,2022.www.globalforestwatch.org.Tree-cover loss is defined as the removal of tree canopy through human-caused or natural events.26 The 15th Conference of the Parties to the Convention on Biological Diversity in Montreal,Canada,commonly abbreviated as COP

126、15,will take place from Dec.7 to 19,2022.27“Climate change:new rules for companies to help limit global deforestation.”European Parliament,Sept.13,2022.Products include:cattle,cocoa,coffee,palm oil,soya and wood;and products that contain,have been fed with or have been made using these commodities(s

127、uch as leather,chocolate and furniture).Parliament wants to also include pig meat,sheep and goats,poultry,maize and rubber,as well as charcoal and printed paper products.28“The Global Assessment Report on Biodiversity and Ecosystem Services.”Intergovernmental Science-Policy Platform on Biodiversity

128、and Ecosystem Services,201929 Constituents of the MSCI ACWI Index as of Oct.12,2022.Paper and forest-products companies lead,but deforestation policies remain thin on the groundShare of companies within selected industries of the MSCI ACWI Index that have disclosed a deforestation policy;industries

129、included where at least 2%of the peers have disclosed a policy.Data as of Oct.12,2022.Source:MSCI ESG ResearchResponses to regulationResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 23 Over the last seve

130、ral years,European regulators have had Big Tech firmly in their sights.The landmark General Data Protection Regulation(GDPR),enacted in 2016,changed the way companies process and protect user data.Not only does it seek to safeguard consumers rights to privacy,but it can lead to hefty fines for viola

131、tors.GDPRs principles have since been adopted in several other jurisdictions.30 Now,the digital landscape may be seeing its next regulatory realignment,with the passing in 2022 of the EUs Digital Markets Act(DMA)and Digital Services Act(DSA).In 2023,we will be watching which of the big internet play

132、ers can adapt fastest to the new regulations and who acts to get ahead of possible moves in other jurisdictions.By focusing on size and reach,the DMA specifically targets big tech companies,the so-called“internet gatekeepers.”Its vast scope includes provisions that might push these companies to open

133、 their walled-garden ecosystems(platforms that limit users access to competing services),facilitate competitive practices and ensure transparency in their advertising services.The DSA has a narrower focus:to manage disinformation and illegal content on consumer-facing platforms.Compliance with both

134、acts starts in 2024.The rollout of GDPR,and subsequent adoption of similar standards in other markets,may serve as a useful comparison.Within the EU,GDPR immediately resulted in improvements in privacy practices,but significant enforcement actions and fines only emerged in subsequent years,according

135、 to the CMS.Law GDPR Enforcement Tracker and MSCI ESG Research.It remains to be seen whether regulators will repeat this exploratory and precedent-building approach before penalties start to roll out.Below is our interpretation of the application of the European Commissions proposed quantitative ind

136、icators to indicate whether a company qualifies(succeeds at becoming)an internet gatekeeper.Beyond GDPR:New regulations could alter the global digital landscapeGabriela de la SernaLondonAndrew YoungLondonRegulationResponses to regulationTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refe

137、r to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 24 Identifying the gatekeepers(though you know them already)Constituents of the MSCI ACWI Index,as of Sept.29,2022.*EEA refers to the European Economic Area.It includes EU countries as well as Iceland

138、,Liechtenstein and Norway.*TMT refers to the combined information technology and telecommunications services sectors,as per the Global Industry Classification Standard(GICS).GICS is the global industry classification standard jointly developed by MSCI and S&P Global Market Intelligence.*The interpre

139、tation of these criteria was made by MSCI ESG Research for illustrative purposes only and may differ significantly from the European Commissions ultimate determination.We assessed that the regulation may likely include at least these five companies,which appear to surpass the monthly-active-users(MA

140、U)threshold(sources:Alphabet:10-K,2019;Meta:10-K,2018;Apple:Q2 2020 earnings call;Microsoft:Q4 2021 earnings call;Amazon:Annual shareholders letter,2021).*Based on MSCI ESG Researchs geographic-exposure assessment and company reports.Source:MSCI ESG Research30 Aridor,Guy,Che,Yeon-Koo,and Salz,Tobias

141、.2020.“The Effect of Privacy Regulation on the Data Industry:Empirical Evidence from GDPR.”NBER.Responses to regulationResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 25 Liz HoustonLondonCotton makes up

142、 over a quarter of all the clothes we wear,but its harmful impacts,like soil degradation and water consumption,have spurred demand for more environmentally sustainable options(see exhibit below).31 Apparel retailers have responded by working with third-party certifiers for sustainable cotton and exp

143、loring cotton alternatives.However,catastrophic flooding in Pakistan and the withdrawal of some certifications from much of China have created supply headaches.In 2023,well be watching to see which retailers can navigate near-term shortages in responsibly sourced cotton,and which ones are prepared t

144、o back new,alternative fibers.A short-term supply shock gives us a glimpse into how cottons long-term future could play out.Water scarcity and extremes in rainfall are expected to increase production risks in cottons most important growing regions,making life far more precarious for cotton farmers.3

145、2 At the same time,ballooning demand for sustainable cotton may make certification efforts more challenging.To meet this demand,Better Cotton,the industrys largest sustainability initiative,estimates that the current number of farmers with which it works will need to triple to an estimated total of

146、7.5 million by 2030.33 Against this backdrop,the apparel industry has been developing alternative sources of sustainable fiber,including lab-grown cotton and processes to recycle post-consumer textile waste into new materials.These innovations may hold solutions to some of the environmental and soci

147、al challenges facing the industry today.To benefit textile companies and investors,these new technologies will have to show not only that they can operate at scale,but that they get there quickly(and cheaply)enough to avoid potential shortages of responsible materials.Cottons crunch point and the fu

148、ture of fiberClimateSupply chainInnovations in the supply chainTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 26 Apparel retailers increasingly relied on third-party certification for

149、responsible cottonData is based on apparel retail constituents of the MSCI ACWI Index,as of Oct.21,2022.Source:Refinitiv,MSCI ESG Research31 In 2021,companies in the apparel-retail sub-industry with combined revenues of over USD 100 billion were sourcing cotton certified to a third-party standard.Th

150、is reflects revenue from eight out of 12 constituents of the MSCI ACWI Index in the apparel-retail sub-industry that report sourcing third-party certified cotton.Apparel-retail sub-industry defined according to the Global Industry Classification Standard(GICS).GICS is the global industry classificat

151、ion standard jointly developed by MSCI and S&P Global Market Intelligence.32 Robinson,Noah.“Cotton industry unprepared for climate change threat to crop and farmers.”Reuters,June 23,2021.33“2021-30 Strategic Direction.”Better Cotton Initiative,December 2021.Innovations in the supply chainResearch In

152、sightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 27 In the last four years,China and the EU have strengthened policies and guidelines on the circular treatment of materials and waste,including electronic waste(e-wa

153、ste).In September 2022,the U.S.followed suit,passing a bill specifically on recycling electric-vehicle(EV)batteries.In 2023,we will be watching which companies up their efforts to mine secondary metals from e-waste both as a way of keeping regulators happy and boosting access to metals critical for

154、clean-energy technologies.Efficiently extracting metals from e-waste could reduce dependency on mining,including in regions prone to conflict and poor labor practices.It also means fewer emissions.For example,a modern Midas touch that extracts gold from e-waste emits 80%less carbon dioxide than conv

155、entional mining.34 In addition to precious metals like gold and copper,e-waste also contains critical metals commonly found in many types of rechargeable batteries.Turning e-waste into a viable source of secondary metals could help meet rising demand for clean-energy technology,including EVs and ene

156、rgy storage solutions.Cobalt may be a bellwether for these efforts to mine e-waste recycling programs could reduce the projected 2040 demand for mined cobalt by 35%.35 But there remains a sizable gap between theory and practice.Although the total recovery rate for cobalt could theoretically reach 95

157、%using existing technology,current recovery rates are at just 30%.36 And more broadly,while global e-waste continues to rise by 9.2 million tons between 2014 and 2019,reaching a total of 53.5 million tons the growth in documented collection and recycling rates has been agonizingly slow from 16.9%to

158、17.4%over the same period.37 This gap is particularly evident in technology-hardware and household-durable companies,which have yet to ramp up the collection and recycling capacity of critical metals from e-waste(see exhibit).But necessity is the mother of invention.A dwindling supply of clean-energ

159、y metals,combined with tightening regulations,may be the catalyst needed to push e-waste recycling into the next phase.Mining old electronics to fuel new energy techSiyu LiuNew YorkClimateSupply chainInnovations in the supply chainTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to t

160、he disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 28 34“A New Circular Vision for Electronics.”World Economic Forum,January 2019.35 Dominish,Elsa,Florin,Nick,Wakefield-Rann,Rachel,“Recycling Electric Vehicle Battery Minerals Can Significantly Reduce Need f

161、or New Mining.”Earthworks,April 2021.36“A New Circular Vision for Electronics.”World Economic Forum,January 2019.37 Forti,Vanessa,Bald,Cornelis Peter,Kuehr,Ruediger,and Bel,Garam.“The Global E-waste Monitor 2020:Quantities,flows and the circular economy potential.”United Nations University,July 2,20

162、22.Analysis includes 68 technology-hardware and household durable constituents of the MSCI ACWI Index,as of Sept.27,2022.Based on the public disclosure of these companies(e.g.,annual reports and 10-Ks),we analyzed the differences in the reporting of e-waste collection and recycling metrics,as well a

163、s any targets related to these collection and recycling efforts.Source:MSCI ESG ResearchA long way off from a circular economy for metalInnovations in the supply chainResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.M

164、SCI.COM|Page 29 In 2022,both China and the EU,two of the worlds largest corn producers,continued to prevent widespread commercialization of genetically modified organisms(GMOs)for food crops such as corn and soybean.This has been due to real and perceived concerns about their health and environmenta

165、l impacts,as well as the business practices of companies that sell them.In 2023,amid signs that China and the EU may be revisiting their stances,well be watching for more concrete steps toward GMO food crops,and which food and agriculture companies are ready for any emerging opportunities.The EU and

166、 China,already large importers of GMO soybean and corn,respectively,have signaled that they may look to loosen the restrictions on GMO seed products.In particular,the EU Green Deal mentioned the development of“seed technology,”while in 2021 the European Commission launched a(still ongoing)review of

167、EU rules on GMOs.In China,research funding for GMO development has increased and the government has been amending its GMO regulatory framework.38 The rising threat of droughts,demand for increasing agricultural yields in the context of national decarbonization commitments and softening consumer resi

168、stance,39 may all be altering the long-held policy calculus.Meanwhile,new gene-editing techniques could allow seed makers to engineer crops with the ability to withstand harsh environmental conditions such as droughts40 or require less insecticide compared to non-GMO crops.41 This,combined with the

169、increased adoption of regenerative farming,could allow countries to embrace land-use and agrichemical policy changes that would decrease emissions while preserving domestic food security.For food and beverage companies whose products are sourced from crops,especially corn and soybean,additional comm

170、ercialization of GMOs could lead to both reduced(or less-volatile)input costs and lower exposure to water-stress risks due to drought-resistant crops.However,questions may remain about the success of commercialization due to continued opposition from consumers and NGOs around biodiversity,patents,he

171、rbicide resistance and the perceived human health effects.GMO regulatory resistance may be softeningCole MartinLondonRegulationClimateBiodiversityInnovations in the supply chainTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research Ins

172、ightsMSCI ESG Research LLCMSCI.COM|Page 30 Our analysis included all issuers within MSCI ESG Ratings coverage,across 68 ESG industries,as of Oct.28,2022.Each dot reflects,for each ESG industry,the proportion of issuers that were operating in geographies with moderate or high exposure to water-stress

173、 risks(y-axis),and whose assets were classified in business segments with moderate to high levels of water intensity(x-axis).Risk exposure was based on assessments from the MSCI ESG Ratings model.Source:MSCI ESG ResearchFood and beverage companies water dependence could drive interest in drought-res

174、istant GMOs38 Byrne,Jane,“Will GM seed planting see China reduce its dependence on feed imports?”FeedNavigator,Jan.18,2022.39“Special Barometer:Food Safety in the EU.”European Commission,June 2019.40 Nuez-Muoz,Leandro,Vargas-Hernndez,Brenda,Hinojosa-Moya,Jess,Ruiz-Medrano,Roberto,and Xoconostle-Czar

175、es,Beatriz.2021.“Plant drought tolerance provided through genome editing of the trehalase gene.”Plant Signaling&Behavior 16(4),1877005.41 Greenthal,Eva,and Jaffe,Greg.“In the weeds:Understanding the impact of GE crops on pesticide use.”Center for Science in the Public Interest,April 2021.Innovations

176、 in the supply chainResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 31 Aura ToaderLondonCan blockchain help supply chains move away from controversy?Modern-slavery regulations that require companies to

177、identify human-rights violations,such as child labor,forced labor or human trafficking,in their supply chains are either in effect or pending implementation in several jurisdictions,including the EU,Canada,U.S.and Australia.Consumers have also been exerting increasing pressure by including ethical c

178、onsiderations in their purchasing decisions.42 In 2023,well be watching pilot projects that use blockchain for supply-chain transparency and traceability,where successful experiments could herald the beginning of a sea-change in supply-chain management.Admittedly,the task ahead is considerable.As ra

179、w materials ship in bulk,certified and noncertified materials can become comingled,making batch traceability difficult.For larger companies,this difficulty compounds as they look to trace materials through multiple tiers of suppliers.Blockchain offers a potential tool for this thorny issue,through a

180、 decentralized,immutable record of all supplier transactions.For example:Walmart Inc.has partnered with IBM to track pork products in China in a farm-to-table approach;Unilever plc adopted SAP SEs GreenToken blockchain technology to source 188,000 tons of palm oil;and Ford Motor Co.used the technolo

181、gy to track cobalt a key mineral for lithium-ion batteries from mine to end user.So far,these pilot projects have been relatively niche.Solving traceability challenges will require much broader adoption.That may mean a combination of factors,including greater standardization and interoperability bet

182、ween systems,43 and companies willing to experiment with new technology.We do not expect to see the challenges of supply-chain transparency solved overnight,but we will be watching for signs of a much-needed turning point.Supply chainInnovations in the supply chainTABLE OF CONTENTS 2022 MSCI Inc.All

183、 rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 32 42“How consumers are embracing sustainability.”Accessed Oct.14,2022.https:/ Jabbar,Sohail,Lloyd,Huw,Hammoudeh,Mohammed,Adebisi,Bamidele,and Raza,Umar.2021.“Blockchain-en

184、abled supply chain:analysis,challenges,and future directions,”Multimedia Systems 27:787-806.Modern slavery:A global issue across all industriesThe map is based on an analysis of all controversy cases(with a status of“Ongoing,”“Concluded,”“Partially Concluded,”“Historical Concern”and“Archived”).We id

185、entified the MSCI ESG Ratings industries with the highest number of modern-slavery-related controversies(forced labor,child labor,bonded labor,human trafficking and migrant workers)and filtered for those with at least 10 controversy cases.For the 15 industries identified,we conducted a deeper analys

186、is and categorized each controversy case based on the type of human-rights violation(e.g.,child labor),country/region where the controversy took place and respective commodity/product.We then identified the countries with the highest number of controversies and highlighted on the map those with at l

187、east five controversies.The most prevalent types of human-rights violations were highlighted per country,along with their respective commodity/product.Data as of September 2022.Source:MSCI ESG ResearchInnovations in the supply chainResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights rese

188、rved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 33 Bentley KaplanCape TownIll be working on the railroad Not?With COVID-19 travel restrictions beginning to lift,2022 should have been the jump-start the rail industry needed.Instead,the year has been fraught with disrupti

189、ons.Weve seen recurrent strikes in the U.K.s passenger-rail industry44 and a narrowly averted industrywide shutdown in U.S.freight rail.45 Further industrial action across several countries,including the Netherlands,46 France,47 Australia48 and South Africa49 suggests that all may not be well betwee

190、n rail companies and their employees.In 2023,well be watching to see which railroads can build out better communication channels to their employees and whether those efforts can stem a rising tide of labor strikes.While complaints differ by market,similar threads run through these agitated workforce

191、s,which have been hit by company downsizings,COVID-19-related reductions in pay packages and inflationary pressures.One starting point to ease this growing tension may lie in a very basic approach efforts by company management to listen to employee feedback or gauge morale.As the exhibit below shows

192、,rail companies may be falling short in this regard.Among 10 sub-industries50 where labor disputes and controversies have been most common(including hypermarkets and airlines),rail companies reported one of the lowest frequencies of employee surveys.Strikes may well be a perennial risk for this high

193、ly unionized industry(averaging 60.4%of workers).51 But finding better ways to monitor workforce morale could provide an initial way to address rising dissatisfaction.Workforce Work lifeTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Res

194、earch InsightsMSCI ESG Research LLCMSCI.COM|Page 34 44 Georgladis,Philip.“UKs biggest rail union seeks mandate to continue strikes into spring.”Financial Times,Oct.12,2022.45 Hunnicutt,Revot,Shepardson,David,and Holland,Steve.“US rail strike averted,but labor deal faces tough union votes.”Reuters,Se

195、pt.16,2022.46 Van Campenhout,Charlotte.“Ongoing labour dispute brings Dutch trains to a halt again.”Reuters,Sept.9,2022.47 Sandford,Alasdair.“France strikes:Transport hit amid nationwide walkout over pay and cost of living.”Reuters,Oct.19,2022.48 Australian Associated Press.“Sydney train strikes:NSW

196、 government and rail unions to seek conciliation next week.”Guardian,Sept.9,2022.49 Banya,Nelson.“South Africas rail and port workers to strike this week over wages.”Reuters,Oct.4,2022.50 Classified according to the Global Industry Classification Standard(GICS).GICS is the global industry classifica

197、tion standard jointly developed by MSCI and S&P Global Market Intelligence.51 For railroad companies in MSCIs ESG Ratings coverage that reported this data,as of Nov.7,2022.Rail faces labor controversies but falls short in efforts to gauge workforce moraleAll issuers within MSCI ESG Ratings coverage

198、were included in the assessment.Data as of Nov.7,2022.Proportion and percentage figures represent the average for issuers by GICS sub-industry.Controversies were sourced from MSCI ESG Controversies data and includes all cases classified as“ongoing,”“partially concluded”or“concluded.”The 10 GICS sub-

199、industries shown here were those with the highest proportion of controversies per company that were also assessed in the MSCI ESG Ratings model on the labor-management key issue.This key issue assesses a companys management programs in the context of its exposure to workforce-related risks.More deta

200、il is provided in the MSCI ESG Ratings Methodology document.Source:company disclosures;MSCI ESG ResearchWork lifeResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 35 The World Health Organization(WHO)has

201、named air pollution as the number-one global environmental health risk,causing millions of premature deaths and substantial economic losses.52 While companies polluting the air themselves may face risks that regulators or impacted communities might push for facilities to be shut down or overhauled,5

202、3 it may be overlooked that companies generating minimal pollution can also be impacted through worsening employee health or difficulty retaining talent in polluted regions.54 As the terms of work continue to evolve post-pandemic,and air quality starts to look like a perk,in 2023 well be watching to

203、 see which companies work the hardest to stop their employees from choking on smoke.Using MSCI Asset Locations,we looked at potential company exposure to pollution-related risks,including ultrafine particulate matter PM2.5 a particularly harmful pollutant.55 To illustrate this exposure,we looked at

204、the 10 constituents of the MSCI ACWI Investable Market Index(IMI)with the highest revenues in India a country with some of the worst air-pollution levels in the world.56 We found that not a single company asset was located in an area where the particle level was below the WHO-recommended threshold o

205、f 5 g/m3;57 some were in areas where the particle level exceeded 100 g/m3.Such pollution levels may not be surprising for an electric utility using coal to generate power(e.g.,NTPC Ltd.),but our analysis also covered banks(ICICI Bank Ltd.,State Bank of India and China Construction Bank Corp.),a reta

206、iler(Rajesh Exports Ltd.)and an electronics distributor(WT Microelectronics Co.,Ltd).Jurgita BalaisyteHong KongSimon AlbrechtZurichChoking on smoke:The human-capital risks from air pollutionWorkforce Work lifeTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the e

207、nd of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 36 Air pollution exposure may pose human-capital risks regardless of industryPM2.5 exposure of the 2020 annual mean value(averaged for all locations in India)for the 10 constituents of the MSCI ACWI Investable Market Index with

208、the highest revenue generated in India,as of July 1,2022.Red line shows the WHO guideline of 5 g/m3.The box represents the interquartile range/median,with significant outliers excluded(all 13 of which were above 80 5 g/m3).Source:Air Quality Life Index,MSCI ESG Research52“Global air quality guidelin

209、es:particulate matter(PM2.5 and PM10),ozone,nitrogen dioxide,sulfur dioxide and carbon monoxide.Executive summary.”World Health Organization,2021.53 Pasricha,Anjana.“Delhis Air Pollution Crisis Prompts Shutdown of Thermal Plants,Schools,Colleges.”Voice of America,Nov.17,2021.54 Xue,Shuyu,Zhang,Bohui

210、,and Zhao,Xiaofeng.2021.“Brain drain:The impact of air pollution on firm performance.”Journal of Environmental Economics and Management,Volume 110.55 Greenstone,Michael,Hasenkopf,Christa,and Lee,Ken.“Air Quality Life Index June 2022:Annual Update.”Energy Policy Institute at the University of Chicago

211、,June 2022.56 Beng,Richard Fuller,Landrigan,Philip,and Balakrishnan,Kalpana.2022.“Pollution and health:a progress update.”Lancet Planetary Health 6:E535-E547.57 The concentration of an air pollutant is given in micrograms(one-millionth of a gram)per cubic meter of air g/m3.Work lifeResearch Insights

212、MSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 37 Since 2020 we have seen a significant shift in media attention from largely pandemic-driven news about how companies dealt with their workforces toward a renewed moment

213、um around climate change.Of the markets we examined,this shift was starkest in China,while U.S.media has remained more focused on human capital.In 2023,well be watching how further shifts in media attention may provide insights into the perception of ESG risks and issuer-engagement priorities as the

214、y evolve in different markets.During 2020,the glut of news pieces related to human capital was directly driven by the impact of COVID-19,as business operations and the future of work radically shifted.At the same time,boards and executives of companies scrambled to adjust to this sea change in worke

215、r expectations and the reality of maintaining operations.58 However,with the advent of COVID-19 vaccines and subsequent reopenings,focus quickly shifted back to tackling climate change and attention there grew substantially,especially in China.In the U.S.,though,human capital remained a dominant new

216、sworthy theme,comfortably outstripping the climate crisis,as companies contend with a tight labor market in the face of elevated worker discontent across the country.59 Although one may contend that news is often a reactive medium,investors may wish to keep their eyes and ears open for any shifts in

217、 ESG risk sentiment and interest as a gauge of new ESG risks at the market level.News shifts from pandemic to climate change,but labor hangs onSatish ShindeMumbaiArun SharviralaTorontoJonathan PonderTorontoClimateWorkforce Work lifeTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to

218、the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 38 A proprietary algorithm was used for primary topic collection,prior to manual validation to ensure proper classification of the topics to ESG themes.We used these topics to collect the news articles fro

219、m September 2019 to August 2022.Calendar years are adjusted accordingly to reflect news articles from September to August.Source:Lexis-Nexis,MSCI ESG ResearchTrends in news mentions globally58 Ng,Matthew A.,et al.2021.“Has the COVID-19 Pandemic Accelerated the Future of Work or Changed Its Course?Im

220、plications for Research and Practice.”International Journal of Environmental Research and Public Health.59 Gurley,Lauren K.“Labor movements next big challenge:Keeping momentum as economy slows.”Washington Post,Oct.24,2022.Work lifeResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reser

221、ved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 39 SK KimSeoulAura ToaderLondonLiz HoustonLondonBargaining with labor:Managing worker shortages in hard timesAfter the reopening of economies following the COVID-19 pandemic,labor markets have tightened and many companies s

222、truggled to fill vacancies.At the same time,most developed and emerging economies saw substantially higher inflation,pushing up the cost of living.This has contributed to rising hourly earnings for workers,with industries such as retail,hotels and restaurants potentially seeing the biggest impact on

223、 profits due to their large workforces and reliance on relatively low-paid employees.In 2023,we will be watching for new winners and losers as the ground continues to shift under companies tackling complex workforce relations and demands for higher wages.Rising employee costs have become an increasi

224、ngly important issue for companies in consumer sectors,more broadly,reflected in growing mentions of wage-related terms in company filings since June 2015(see exhibit below).For some employers,including those in the U.K.,wages have been growing through nationally mandated increases.Elsewhere e.g.,in

225、 the U.S.companies have proactively raised wages ahead of a potential increase in the legal minimum wage.Even when overheated labor markets have cooled down,research shows that employee satisfaction has been a persistent indicator of excess returns,particularly in times of crisis.60 Many employers h

226、ave reflected on their strategies in this area.Committing to paying a living wage could attract and retain workers in a tight labor market.Reorganizing or reducing bonuses and benefits to fund higher basic wage rates may be tempting,but could arguably be short-sighted.Offering nonstatutory benefits,

227、such as paid parental leave or health insurance,could help companies make themselves more attractive.Our research shows that as of June 2022,only 10%of hotels and travel,restaurants,food and staples retailing and consumer discretionary retail constituents of the MSCI ACWI Index offered a broad range

228、 of nonstatutory benefits to their employees.If the same old strategies arent getting the job done,companies willing to take more creative approaches might find a new advantage.Workforce Work lifeTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this do

229、cument.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 40 We looked at company filings from June 2015 to September 2022 and used natural-language processing to quantify trends in discussions and proactive measures around potential increases in employee-related costs.Annual reports,10-Ks,40-Fs an

230、d 20-Fs of MSCI ACWI Investable Market Index(IMI)constituents were matched and analyzed using keyword analysis.Results were aggregated for related keywords,which included:wage,minimum wage,minimum hourly wage,wage increase,labor cost increase,living wage,fair wage and minimum wage increase.We compar

231、ed the performance of 146 consumer discretionary constituents of the MSCI ACWI IMI retailing(n=66),food&staples retailing(n=53),hotels(n=10)and restaurants(n=17)versus the overall index constituents.Data as of Oct.26,2022.Source:MSCI ESG ResearchA growing focus on wages for retail,restaurant and hot

232、el companies60 Boustanifar,Hamid,and Kang,Young Dae.2022.“Employee Satisfaction and Long-Run Stock Returns,19842020.”Financial Analysts Journal 78:129-151.Work lifeResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI

233、.COM|Page 41 Despite inflationary pressures,the supply of green bonds retreated by just 1%during the first half of 2022,compared with the second half of 2021.61 But that could be just the first sign of things to come.In 2023,we will be watching whether green bonds can maintain a credible growth path

234、 in the face of rising interest rates,lower spread premiums and growing concerns about greenwashing.Since the first major launch of green bonds in 2007,62 they have been on a rapid upward trajectory,growing from a total issuance of USD 37 billion in 2014 to USD 578 billion in 2021.63 This growth ref

235、lects a broader enthusiasm for green,social and sustainability(GSS)bonds,which accounted for 1.7%of the global USD 100 trillion bond market in 2020.Despite a collective interest,green bonds specifically have continued to hold pole position,making up roughly 60%of the total issuance value of GSS bond

236、s each year.But the honeymoon period may be starting to wane,as yield spreads of green bonds have remained lower(eight basis points on average)compared with conventional bonds.64In addition to lower yield spreads,investors may also be weighing the credibility of green bonds and specifically the“gree

237、nness”of the activities they are funding.65 Without a widely adopted,standardized framework,issuers have had some flexibility in the labeling of their bonds.Between January 2021 and September 2022,of the more than 600 bonds we assessed,approximately one in five fell short of explicit green-bond crit

238、eria(see exhibit),with some even going so far as to fund fossil-fuel generation or transmission.Investor skepticism may be soothed by developments that include the proposed EU Green Bond Standard,but until these types of standards are in place,companies may have to work harder against the perception

239、 that they are issuing“green-ish”bonds with potentially questionable practices and reduced yields.Is the honeymoon over for green bonds?Meghna MehtaMumbaiYoon Young ChungBostonVishakha PandeyMumbaiClimateInvestmentTurning pointsTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the

240、disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 42 One in five green bonds falls short of Bloomberg MSCI Green Bond Index criteriaAnalysis of 632 investment-grade self-labeled green bonds tracked by MSCI ESG Research from January 2021 to September 2022.The

241、universe of these bonds is restricted to all self-labelled green bonds meeting the Bloomberg Global Aggregate Index criteria.While around 81%of these bonds are part of the Bloomberg MSCI Green Bond Index,the remaining 19%failed to meet the MSCI green bond and green loan assessment methodology.These

242、bonds are potentially funding projects which are not considered green as per the methodology.Sources:Bloomberg MSCI Green Bond Index,Bloomberg Global Aggregate Index,MSCI ESG Research61“Green Bond Pricing in the Primary Market:January-June 2022.”Climate Bonds Initiative,Sept.16,2022.62 AAA-rated iss

243、uance from multilateral institutions European Investment Bank(EIB)and World Bank.63“$500bn Green Issuance 2021:social and sustainable acceleration:Annual green$1tn in sight:Market expansion forecasts for 2022 and 2025.”Climate Bonds Initiative,Jan.31,2022.64 Caramichael,John,and Rapp,Andreas.“The Gr

244、een Corporate Bond Issuance Premium.”Federal Reserve Board,June 2022.65 Flood,Chris.“Fears rise over greenwash bonds.”Financial Times,March 21,2022.Turning pointsResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.C

245、OM|Page 43 Economic sanctions on Russia in response to its invasion of Ukraine have led to international markets avoiding Russian energy,higher shipping costs and greater competition to secure alternative energy supplies.National energy security has long meant possession of,or ready access to,fossil

246、-fuel reserves,but a handful of countries have managed to alter the calculus.In 2023,well be watching how continued energy-market disruptions impact the global clean-energy transition in different countries and what it could mean for longer-term sovereign risk exposure.With European governments scra

247、mbling to find alternative energy options to substitute Russian hydrocarbon supplies,the move to a zero-carbon economy seems to have become a secondary concern,at least for now.Some governments have resorted to importing coal,the most carbon-intensive fossil fuel,and locked into long-term gas contra

248、cts at the expense of investment in renewables.Yet several governments have also committed to accelerate renewable expansion.These policy shifts could have a crucial impact on how governments adjust their plans for energy transition.Our analysis,as detailed in the exhibit below,showed that some coun

249、tries appeared to be better positioned to manage the transition to a low-carbon economy than others.For example,Denmark and New Zealand are among countries with some of the highest energy security and progress toward energy transition because they diversified their energy supplies and invested in re

250、newable energy early enough to stay on track to meet their net-zero emission targets.These countries could be better placed to use the global energy-market disruptions to their benefit and capture green opportunities.Over the medium term,we would expect them to be able to mitigate energy risks and s

251、ustain higher growth dynamics.However,countries with poor energy security and limited transition efforts might be forced to sacrifice long-term GDP growth prospects in favor of immediate carbon-intensive solutions,delaying the global clean-energy transition.Magdalena SordylNew YorkSovereign policy d

252、ilemma:Energy security vs.the clean-energy transitionClimateTurning pointsTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 44 MSCI assesses the exposure of countries to ESG risks and the

253、ir management of those risks in the MSCI ESG Government Ratings.The axis titles used in the chart are a simplification of the analysis undertaken for both energy security and low-carbon-transition preparedness.The positioning of countries along each axis reflects an aggregation of risk exposure and

254、management in their energy security and readiness for a low-carbon transition,respectively.Outliers are highlighted for illustrative purposes.Data as of October 2022.Source:MSCI ESG Research.A trade-off between energy security and energy transition is not inevitableTurning points 2022 MSCI Inc.All r

255、ights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 45 Research InsightsMSCI ESG Research LLCResearch InsightsMSCI ESG Research LLCEnergy crisis,Ukraine war driving fossil-fuel agenda,but dont rule out renewablesThe ongoing war in Ukraine and high-inflationary env

256、ironment may limit near-term pressure to reduce global greenhouse-gas(GHG)emissions as governments prioritize energy security and affordability.But for power companies,swapping coal and oil for natural gas may not be the only practical option.In 2023,well be watching which companies are keeping thei

257、r eyes on longer-term decarbonization trends and expanding deployment of renewables.The U.S.is releasing oil from its strategic petroleum reserve,which may encourage a near-term increase in hydrocarbon production.66 Across the pond,the U.K.is launching a new oil and gas licensing round67 and some EU

258、 member states are delaying their planned phaseout of coal-power plants.68 And if natural-gas prices remain elevated,this may continue to boost demand for more emission-intensive coal and oil products as cheaper alternatives for producing power and heat.But for companies sticking with their net-zero

259、 plans,these alternatives come with complications.Renewables face some short-term uncertainties such as supply-chain bottlenecks,windfall taxes on low-carbon power generation and trade wars.But looking beyond 2023,long-term regulatory tailwinds could encourage the deployment of renewables and once a

260、gain put them at the forefront of the fossil-fuel agenda.Elchin MammadovLondonMathew LeeNew YorkClimateTurning pointsTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 46 Research InsightsMSCI ESG Research LLCNetworks and rene

261、wables dominate capex plans of major utilities in U.S.and EuropeData for 26 European and U.S.-based power-generating constituents of the MSCI ACWI Index,as of Aug.5,2022.Definitions of capital expenditures are based on MSCIs ESG climate-change metrics.66“President Biden to Announce New Actions to St

262、rengthen U.S.Energy Security,Encourage Production,and Bring Down Costs.”The White House,Oct.18,2022.67 Fisher,Jonah.“UK defies climate warnings with new oil and gas licences.”BBC News,Oct.7,2022.68 Zachov,Aneta.“EU countries eye coal over gas supply fears.”Euractiv,March 15,2022.Turning pointsResear

263、ch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 47 A global energy crunch and greater demand for low-carbon energy has shifted support toward nuclear power.In 2023,we are watching whether an industry that enj

264、oyed its last rise to prominence in the 1990s69 will be able to manage high costs,long project lead times and labor constraints to rejuvenate itself.In July 2022,the EU voted to label nuclear energy a sustainable activity under their green taxonomy,aiming to make it easier for capital to flow into n

265、uclear assets.While this move received criticism for enabling increased radioactive waste,China,South Korea and other countries developing taxonomies have taken the same approach.70 Further,following Russias invasion of Ukraine,several countries including Germany,South Korea,Japan,Belgium,France,Net

266、herlands and the U.S.have either reversed nuclear phaseout plans,moved to restart idled reactors,offered subsidies to extend the life of existing atomic units or announced the addition of new plants.71 The near decadelong lead times needed for project development means that nuclear energy will alway

267、s be a long-term game.72 Companies that are already operating nuclear plants or have committed to plans to add new nuclear capacity in the coming years are therefore likely to benefit the most from more favorable regulatory conditions.However,a nuclear renaissance is not guaranteed:Potential obstacl

268、es include construction delays,higher levelized costs compared to other technologies(not only wind and solar,73 but dispatchable hydropower,coal and gas power with carbon capture and storage74)and an aging workforce(25%age 55 and above75).Therefore,astute financial decisions and human capital manage

269、ment may become the keys that unlock new opportunities in nuclear energy.Nuclear energy contemplates a comebackHanna TruebBostonElchin MammadovLondonMathew LeeNew YorkClimateRegulationTurning pointsTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this

270、document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 48 Biggest earners in nuclear power show clear differences in current and planned fleet capacityThe top 10 constituents of the MSCI ACWI Investable Market Index in terms of estimated percentage of revenue from nuclear power generation.Plan

271、ned nuclear capacity refers to nuclear projects that are announced or under construction but not yet operational.Bubble labels and size correspond to each companys current installed nuclear capacity in gigawatts.Data as of Oct.13,2022.Source:S&P Capital IQ,MSCI ESG Research69 Nuclear power generatio

272、n as a percentage of total global energy generation peaked at 17%in 1996.“Statistical Review of World Energy.”BP,Sept.21,2022.70“What the inclusions of gas and nuclear in the EU Taxonomy could mean for investors and asset managers.”S&P Global,Feb.22,2022.71 Connolly,Kate.“Germany to delay phase-out

273、of nuclear plans to shore up nuclear security.”Guardian,Sept.5,2022.Lee,Heesu.“Korea pares back renewables as it taps nuclear for climate goal.”Bloomberg,Aug.30,2022.Patrick,Philip.“Japans nuclear renaissance:The global energy crisis has shifted public opinion.”Spectator,Aug.25,2022.“Belgium reaches

274、 initial deal to prolong nuclear power by 10 years.”Euractiv,Jul.22,2022.Clifford,Catherine.“What the climate bill does for the nuclear industry.”CNBC,Aug.22,2022.Stuart Leeson,Sofia.“Dutch cabinet to reveal plans for new nuclear power plants.”Euractiv,Jun.27,2022.“Macron sets out plan for French nu

275、clear renaissance.”World Nuclear News,Feb.11,2022.72“Median construction times for reactors since 1981.”World Nuclear Association,Sept.25,2020.73“Levelized Cost of Energy Analysis 15.0.”Lazard,Oct.28,2021.74“LCOE range for selected dispatchable low emissions electricity sources in the Sustainable De

276、velopment Scenario,2030,2040 and 2050.”International Energy Agency,Jun.29,2022.75“Global Energy Talent Index Report 2022.”Airswift,Jan.2022.Turning pointsResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page

277、49 As oil prices are projected to stay above USD 90 a barrel in 2023,76 energy companies are likely to continue to generate hefty profits,as in 2022.In the first quarter of 2022,they saw median profitability growth of 127%year-over-year.77 Historically,high energy prices have also driven patenting a

278、ctivity toward renewable-energy technologies.However,examining the current patent portfolios of energy companies specifically we found that they were still firmly focused on the traditional business of fossil fuels and petrochemicals.78 In 2023,as energy companies look to continue benefiting from hi

279、gh oil prices,well be watching what they do with their cash-filled coffers:double-down on existing business models or funnel more toward clean-tech investments.Viewing patents as a proxy for investment in innovation can offer a glimpse into how energy companies are likely to change(or not change)the

280、ir future business strategy.Using MSCI ESG Researchs patent database,79 including 57 types of low-carbon patents,we analyzed the patent portfolios of 1,714 energy companies to identify the 10 leading types of low-carbon patents for the energy industries.80 Such patents cover all technologies or equi

281、pment intended to reduce emissions from existing processes,including those that ultimately yield fossil fuels.On aggregate,the largest concentration of patents complemented the traditional activities of fossil-fuel extraction.Three of the four largest integrated oil and gas companies held a cluster

282、of patents related to petrochemicals and enhanced efficiency of refining and production methods(ExxonMobil Corp.,Shell plc and Chevron Corp.).An alternative concentration of patents around renewables may signal more aggressive investment toward the energy transition e.g.,in solar-power technologies(

283、TotalEnergies SE).This means analyzing patent data may offer investors insight into how wedded energy companies are to fossil fuels and whether this matches their stated energy-transition ambitions.Patent activity suggests energy firms still dig fossil fuelsUmar AshfaqNew YorkMathew LeeNew YorkClima

284、teTurning pointsTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 50 76“Short-term energy outlook.”U.S.Energy Information Administration,Oct.12,2022.77 Milman,Oliver.“Largest oil and gas

285、producers made close to$100bn in first quarter of 2022.”Guardian,May 13,2022.78 Grubb,Michael et al.“Induced innovation in energy technologies and systems:a review of evidence and potential implications for CO2 mitigation.”Environmental Research Letters,March 29,2021.79 For more on MSCIs patent data

286、base and value assessment methodology,please refer to:“MSCI Climate VaR methodology part 3:Technology opportunities,”MSCI ESG Research,June 2020.(Client access only.)80 We defined energy companies as those within MSCIs coverage in the following industries as of Oct.5,2022:energy equipment and servic

287、es,integrated oil and gas,oil and gas exploration and production,oil and gas refining,marketing,transportation and storage.Top 10 low-carbon patent categories for the energy industryThe four companies displayed are the largest integrated oil and gas companies within MSCI ESG Researchs coverage by lo

288、w-carbon patent scores and represent almost 30%of the total low-carbon patent values within the energy sector.MSCI ESG Researchs Low-Carbon Patent Score seeks to establish a picture of the relative level and quality of patents held by companies.Each patent receives a score based on forward citations

289、,backward citations,market coverage and Cooperative Patent Classification(CPC)/International Patent Classification(IPC)coverage.MSCI ESG Researchs model currently covers 96 million unique patents that have been granted from over 70 patent authorities worldwide.Data as of Oct.13,2022.Source:MSCI ESG

290、ResearchTurning pointsResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 51 Virag Bokodi BudapestCody DongShanghaiFor banks,greenhouse-gas(GHG)emissions associated with their loans are fundamental to analy

291、zing climate transition risk.Until recently,estimations and disclosures have been limited.Some banks in developed markets have already started to partially report GHG emissions associated with their lending books,but banks in emerging markets like China have yet to follow suit despite likely being,i

292、n some cases,some of the worlds largest financers of new emissions.In 2023,we will be watching to see if the increasing regulatory and investor pressure felt by developed-market banks to disclose loan emissions spreads to big emerging-market lenders.The number of companies that have committed to mea

293、sure and disclose financed emissions under the harmonized reporting standard for financial institutions developed by the Partnership for Carbon Accounting Financials(PCAF)81 has grown rapidly.82 But they are concentrated in developed markets.Using the MSCI Total Portfolio Footprinting solution,which

294、 follows PCAF principles and banks publicly available loan breakdown by sector,83 we calculated a high-level loan emissions estimation for a sample of six state-owned Chinese banks(the“big six”).84 These banks accounted for around 45%of the total loan balance in the country,as of the end of 2021.85

295、As of October 2022,none of them had reported loan emissions.Loan sectors with high emission intensity represented nearly 30%of the total loan balance of these banks,as of the end of 2021,but these sectors share of total loan GHG emissions was approximately 80%.Differences in emissions intensity meas

296、ured by loan size between individual banks were driven by the sector distribution of loans.More detailed inputs from banks themselves could bring higher-quality estimations and help all stakeholders better understand the resulting risk exposure and financed contributions to climate change.Pulling ba

297、ck the veil on banks loan emissionsClimateNew frontiers in measurement and transparencyTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 52 Breakdown of loan balance and emissions for the

298、 big six state-owned Chinese banksEmission data is calculated using GHG-emissions intensity(Scope 1 and 2)by loan sector using the MSCI Total Portfolio Footprinting methodology(quality score of 5).Emissions data includes both required(known use of proceeds)and optional(unknown use of proceeds).In th

299、is analysis,high-emission-intensity loan sectors are defined as those with 100 tons CO2 equivalent/USD 1 million,which include utilities,oil,gas&consumable fuels,metals&mining,transportation and manufacturing.Medium-emission-intensity loan sectors are defined as those with 10-100 tons CO2 equivalent

300、/USD 1 million,which include commercial-other,wholesale,hotels,restaurants and leisure,telecommunication services,information technology and commercial and professional services.Low-emission-intensity loan sectors defined as those with 10 tons CO2 equivalent/USD 1 million,which include real estate,s

301、ervices,financials,credit card,consumer,retail-other and mortgage.Data as of Oct.13,2022.Source:MSCI ESG Research81“The Global GHG Accounting&Reporting Standard for the Financial Industry.First Edition.”PCAF,Nov.18,2020.82“The Partnership for Carbon Accounting Financials(PCAF)welcomes 200th financia

302、l institution:Japan Post Bank Co.,Ltd.”PCAF,Jan.31,2022.Special PCAF News Update:Fall 2022.”PCAF,Sept.8,2022.83 MSCI Total Portfolio Footprinting maps bank-disclosed loan sectors to the Global Industry Classification Standard(GICS).GICS is the global industry classification standard jointly develope

303、d by MSCI and S&P Global Market Intelligence.84 As defined by the China Banking and Insurance Regulatory Commission.85 Calculated using company reported loan balances divided by total outstanding loans in China according to Peoples Bank of China.New frontiers in measurement and transparencyResearch

304、InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 53 Cody DongShanghaiSylvain VanstonParisInsurance emissions:The actuarial revolution has begunFinanced emissions has become a mainstream ESG concern,but“insured em

305、issions”the attribution of an insurance-company clients emissions to its insurance underwriter is an emerging concept.In 2023,we will be watching which global insurers act first to measure their insured-emissions footprints and position themselves ahead of investor pressure or any future regulatory-

306、reporting requirements that might emerge.Insurers do not“own”their customers,yet they do have an“enabling”influence over their activities.Insurers that wish to evaluate the carbon emissions of their assets and liabilities strive to connect their role as asset owners and as risk carriers.The Net-Zero

307、 Insurance Alliance(NZIA)has partnered with the Partnership for Carbon Accounting Financials(PCAF)to develop the first global standard for measuring insurance-associated emissions(IAEs).The final guidance was released in November 2022,with a focus on commercial lines and retail-motor lines.The repor

308、ting and the reduction target of IAEs may help incentivize insurers to influence low-carbon behaviors for their customers.Insurers that support the PCAF framework are expected to report on their IAEs and,by July 2023,NZIA members are also expected to publish decarbonization targets using this new me

309、tric for their commercial-lines and retail-motor portfolios.Effectively,the only ways to achieve these targets are to influence insurance clients or reorganize insurance-business exposure,neither of which may come easy.Nonetheless,with much of the world needing insurance for one thing or another,ins

310、urers dedicated to net-zero may have an influential role to play in driving decarbonization of the global economy.To claim any credit for that,they will need to measure their insured emissions.ClimateNew frontiers in measurement and transparencyTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Ple

311、ase refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 54 Measuring insurance-associated emissions as the foundation for other initiativesSource:MSCI ESG Research(adapted from PCAF)New frontiers in measurement and transparencyResearch InsightsMSCI

312、 ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 55 Bhaveer ShahSingaporeEmissions attribution could help keep portfolios aligned with net-zeroFollowing a volatile year for markets,investors now face the challenge of account

313、ing for the ups and downs in their portfolios associated financed emissions.To help overcome this challenge,new analytical models inspired by traditional performance-attribution analysis are emerging.In 2023,we will be watching how investors might adopt these models to help them understand changes t

314、o their financed emissions and work toward staying aligned with long-term decarbonization pathways.These new models may be able to decompose headline emissions into their contributing factors,in part by segmenting changes in portfolio emissions from new,exited and existing positions a particularly h

315、elpful tool during erratic market periods like 2022.Furthermore,with sharp adjustments to asset valuations sometimes affecting carbon-footprint intensity metrics,emissions-attribution models might help identify how factors like foreign-exchange fluctuations affected emissions intensities.Emissions-a

316、ttribution models may also help isolate temporary one-off developments such as the sudden divestments from Russian markets from long-term trends.Ultimately,emissions-attribution analysis has the potential to provide a framework for investors to understand the causes behind temporary deviations in th

317、eir emissions profiles,helping them work toward staying aligned with long-term net-zero financed-emissions trajectories.Investors stakeholders may also benefit from additional granularity and transparency into metrics that may currently be reported only at a headline level.ClimateInvestmentNew front

318、iers in measurement and transparencyTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 56 Example attribution analysis of changes in portfolio emissions intensityThis analysis is performed

319、 on a hypothetical basket of issuers that is based on the MSCI ACWI Investable Market Index from April 30,2021,to April 29,2022.The diagram is illustrative only and does not constitute any form of investment advice or actual index performance.Source:MSCI ESG ResearchNew frontiers in measurement and

320、transparencyResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.MSCI.COM|Page 57 Kenji WatanabeTokyoSiyao HeBeijingNet-zero:Companies are aiming high,but are their strategies practical?Climate-target credibility is likel

321、y to become the next frontier for institutional investors aiming to decarbonize investment portfolios and reduce real-economy emissions of greenhouse gas(GHG)in accordance with United Nations-led net-zero initiatives,such as Net-Zero Asset Owner Alliance.We have observed an increasing number of comp

322、anies setting climate targets,including net-zero emission targets.Yet questions remain as to whether these targets are achievable.In 2023,well be watching which companies up their climate target game in the face of what we expect to be increasing pressure from institutional investors who have their

323、own portfolio net-zero targets to meet.Of the 9,238 constituents in the MSCI ACWI Investable Market Index(IMI)as of October 2022,36%(3,306)have set climate targets.86 Of these,715 companies have set targets aligned with the Paris Agreement and approved by the Science-Based Targets initiative(SBTi)87

324、 and 45 have set net-zero emissions targets for 2050 or earlier under the SBTi corporate net-zero standard,one of the most rigorous net-zero standards across industries.An additional 582 companies have committed to setting SBTi-approved net-zero targets in the next two years.Such third-party validat

325、ions can boost investor trust in the information companies disclose and improve the transparency of climate targets.With other disclosure frameworks and regulations in the pipeline,companies and investors may have a more standardized manner of assessing climate targets.The Glasgow Financial Alliance

326、 for Net Zero(GFANZ),for example,has proposed its own framework to help investors assess the soundness and credibility of corporate climate targets.We found companies with SBTi-approved targets typically scored better in the GFANZ framework than those without(see exhibit).This may suggest that compa

327、nies that went through a rigorous third-party target-validation process(e.g.,SBTi)were more likely to have disclosed transition planning and capital allocation for decarbonization activities and demonstrated successful track records increasing the transparency of emissions-reduction strategies and e

328、nhancing the feasibility of climate targets.With the focus on corporate climate targets likely to intensify and regulations around disclosure likely to tighten,investors should be able to make better informed climate-investing decisions going forward.Antonios PanagiotopoulosLondonClimateNew frontier

329、s in measurement and transparencyTABLE OF CONTENTS 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at the end of this document.Research InsightsMSCI ESG Research LLCMSCI.COM|Page 58 Credibility assessments of constituents of the MSCI ACWI IMI with climate targetsFor the 3,306 consti

330、tuents of the MSCI ACWI IMI with climate targets,as of October 2022.*GFANZ portfolio-alignment measurements credibility indicators and CDP data metrics.CDP is a not-for-profit charity that runs the global disclosure system for investors,companies,cities,states and regions to manage their environment

331、al impacts.Source:CDP,MSCI ESG Research86 The MSCI ACWI IMI constituents referenced in the report are as of Oct.17,2022.Target-level data was downloaded from MSCI ESG Manager on this date.87“Companies taking Action”and“SBTi Corporate Net-Zero Standard.”SBTi,October 2021.SBTi is a multinational organ

332、ization promoting the adoption of climate targets aligned with the Paris Agreement.SBTi-related target-level data was downloaded from these reports.New frontiers in measurement and transparencyResearch InsightsMSCI ESG Research LLC 2022 MSCI Inc.All rights reserved.Please refer to the disclaimer at

333、the end of this document.MSCI.COM|Page 59 Helen MarlowLondonLab-grown commodities:The new frontier?Lab-grown diamonds have moved firmly into the mainstream,and leather,cotton and even fur could be next.For companies facing controversy or criticism over the environmental or human-rights impacts of their raw materials,this could look like a game-changer.In 2023,we will be watching industry investmen