ESG: MSCI Chief Fernandez Warns ESG is a “Permanent Change in the Way Capitalism Works”

January 23, 2020 | ESG and Sustainability, News

“We’re sounding the alarm bells, “ said MSCI chairman and CEO Henry Fernandez on CNBC’s Squawk on the Street.

MSCI is a global index and fund provider. It’s chairman and CEO’s remarks regarding the potential and convulsive effect of ESG on global investing echo those of BlackRock CEO Larry Fink. Fernandez warned that institutional portfolios could dramatically underperform if ESG norms led to common repricing and reallocation of assets globally.

“We are sounding the alarm bells that if you are an investment institution and you’re not embracing this and taking it into account, it’s going to be at your own peril,” said Fernandez as reported by CNBC.

MSCI’s Fernandez: ESG not just a fad

MSCI should know because it rates more than 15,000 companies on ESG criteria. It also published “Principles of Sustainable Investing,”  setting forth its views and recommendations on the core principles and best practices four ESG integration by investors globally.

In the document, MSCI warned of a convergence of factors such as climate change, social attitudes, institutional governance, and technological innovation. This convergence would “significantly impact the pricing of financial assets and the risk and return of investments and lead to a large-scale reallocation of capital over the next decades.”

ESG ratings

The company is working on making ESG ratings available by end of April. These will cover all its equity indices as well as the big mutual funds.

According to MSCI’s Fernandez, the concept is still an evolution, but would eventually become very data-driven. However, ESG is not a fad, but a “permanent change in the way capitalism works,” he warned.

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