MSCI will remove the terms ‘ESG’ and ‘Impact’ from five of its indices in response to tightening greenwashing regulation.
The index giant confirmed to IPE that it will cut the reference to ESG from four index families: ESG Leaders, ESG Screened, ESG Universal and ESG Focus.
Its MSCI Sustainable Impact Indexes family will become the MSCI Sustainable Development Indexes as part of the overhaul.
Nothing else will change in the titles or the methodologies of the products.
In a consultation launched in April, the firm proposed renaming three of the indices – MSCI ESG Leaders, MSCI ESG Screened, MSCI ESG Universal – by the end of 2024.
It suggested a range of alternative names for each, only one of which (ESG Screened) was approved in the final decision.
Names that didn’t make the cut included “Sector Top Rated” and “ESG Ratings Tilted”.
At the time, MSCI attributed the plans to changes in regulation across Europe and the UK, as rule-makers clamp down on greenwashing in the finance sector.
It namechecked new fund-labelling and anti-greenwashing rules from the UK’s Financial Conduct Authority, and fund-naming guidelines being tightened by the European Securities and Markets Authority.
Both initiatives seek to create stricter rules for entities marketing their investment products using terms such as ‘ESG’, ‘Impact’ and ‘Sustainable’.
“The regulations focus on fund names,” MSCI noted in its consultation document. “However, names of index tracking funds and indexes tend to closely align. Thus, we propose to rename MSCI ESG Leaders, MSCI ESG Screened and MSCI ESG Universal indexes by Q4 2024, and solicit your views on our proposal.”
A spokesperson for the company has now told IPE: “Following client consultation, MSCI will proceed with the renaming of certain standard indexes, as well as custom indexes used for European Union and/or United Kingdom Benchmark Regulation use cases, effective 3 February 2025.”
“Through this decision, MSCI will continue to provide its global client base with support to meet local regulatory requirements, in this case aligning with new rules on naming sustainability-related products in the EU and the UK.”
A report published today by data provider RepRisk suggests that the recent boom in regulation is driving down cases of greenwashing globally.
The research finds a 20% drop in the number of greenwashing cases identified by the media, civil society and regulators over the past 12 months.
“Regulation is likely to have played a significant role in driving this downward trend,” RepRisk said in its findings.
Within the finance sector, it noted there had been a 70% increase in “climate-related greenwashing” between 2022 and 2023, which fell by 20% in the 2024 review.
“The Banking and Financial Services sector continues to be vulnerable to greenwashing allegations and fines due to its role in financing industries with significant environmental impacts,” RepRisk wrote.
“Financial institutions often market themselves as leaders in ESG investing but face scrutiny for failing to align these claims with their actual practices.”
Read the digital edition of IPE’s latest magazine
No comments yet