April 2020

Sustainability and impact report

A dialogue with investors

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Section 2

Metric #1: Portfolio ESG rankings vs. peers (third-party assessment)

Why is this relevant?

Many investors want to see a snapshot view that shows a portfolio’s aggregate ESG ratings or rankings, and many value the independence of an assessment that is based on third-party data.

What does this measure show, and why?

MSCI is one of the third-party data providers we work with as part of our research process, and its analysis includes a scoring system that can be aggregated to compile portfolio-level ESG rankings versus peers. When we compare the aggregate MSCI ranking of our portfolios since they were transformed to sustainable investing products, we see a meaningful improvement, both on an absolute basis and relative to peers. This shift is as might be expected given the change in fund mandates to include an explicit focus on sustainability analysis. While we do not aim for a specific level of third-party scoring in our investment process, the natural outcome of our portfolio construction resulted in high scores.

This report contains certain information sourced from and/or MSCI ESG Research LLC, or its affiliates or information providers (the “ESG Parties”) and may have been used to calculate scores, ratings, or other indicators.

How do we use this measure?

MSCI is a leading ESG data provider, and its process includes a detailed company-by-company scoring system. This company-specific data adds meaningfully to the field and often helps investors to better understand key sustainability issues. By definition, this scoring process is complex, and the aggregate scores reflect a combination of heterogenous factors. (For more information on the MSCI ESG Fund Ratings, please see Appendix 2.) Our own research efforts do not rely on these third-party scores; rather, we focus on putting all third-party data into a more complete fundamental context. We aim to assess not only past and current performance, but future direction as well.

Where are there opportunities for future research and focus?

All ESG data and analysis, including MSCI’s, is evolving rapidly as corporate reporting expands its breadth and depth, and as alternative data sources grow. Investors’ use of this type of data will also continue to develop over time. The ongoing improvements in all forms of ESG data, from all sources, will allow researchers to ask more relevant and informed questions, and this analysis in turn will be able to inform investment decisions in increasingly valuable ways.