2020 ESG Trends project: what are the big challenges for the new decade?

Give a brief overview of your project’s objectives and how your approach to the subject matter differed from previous research. 

To mark the beginning of the new decade, MSCI ESG Research undertook an ambitious project entitled “2020 ESG Trends project: What are the big challenges for the new decade?” It identified 10 challenges MSCI felt would leave an impression on the investment landscape throughout the new decade. 

The project pioneered a new digital approach to showcasing thousands of ESG data points in an interactive way. The project is an extension of the 2020 ESG Trends report that MSCI ESG Research published over the past eight years.  

The report differs from previous research in that: 

• The project goes beyond a traditional research ‘report’, bringing to life thousands of ESG data points in interactive form to showcase how ESG factors were useful in explaining the decade investors are likely to face. It used MCSI ESG Research’s ESG ratings, ESG metrics, screening, Sustainable Development Goals (SDGs), climate and controversies datasets of nearly 14,000 listed issuers.
• The innovative use of alternative datasets (i.e. data not disclosed by the companies rated) to unearth emerging risks or trends relevant to investors – and expose the companies leading or lagging in their efforts to respond to the challenge (for example MSCI used alternative datasets to identify the companies who have pledge to support an SDG but have also experience a controversy associated with the goal).
• The ability of the campaign to reach and educate investors globally of the value of using ESG data in examining macroeconomic or investor-relevant themes such as climate change, antibiotic resistance, deforestation and the growth of ESG regulation, to name a few of the topics the 10 questions explored. 

Describe your methodology, including how you addressed macro trends and mechanisms for effecting systemic change. 

MSCI posed 10 questions: 

Q1: Who will lead the race to cut carbon? (Feb 3) 

We used countries’ Nationally Determined Contributions and distilled them into a comparative map to show possible reductions in global emissions. Countries were colour-coded to reflect climate ambition as determined by estimating the percentage reduction in 2030 GHG emissions per capita from each country’s BAU scenario against its NDC. 

Q2: What if antibiotics stop working? (Feb 10) 

MSCI compared research funding for antimicrobial resistance with other major diseases. The data showed the market disconnect between funding and possible fatalities, especially with regards to antibiotic resistance. The data also summarised companies addressing the issue. 

Q3: What if public companies stay privately controlled? (Feb 18) 

MSCI plotted how companies used different control-skew mechanisms (e.g. multiple share classes) to retain control and limit the power of shareholders. 

Q4: What if we can’t balance people and planet? (Feb 24) 

MSCI examined how the world’s growing demand for cleantech could pose new ESG risks for investors in metal and mining companies, some of which were already facing human rights and environmental controversies. 

Q5: What if ESG risks transcend politics? (Mar 2) 

MSCI looked at how various ESG factors differed for companies located in states that voted for Trump or Clinton in the 2016 U.S. presidential election. 

Q6: What if gender parity is out of reach for corporate boards? (Mar 9) 

To mark International Women’s Day, MSCI used scenario analysis to chart the timeline to get to gender parity on boards. 

Q7: Who will regulate ESG? (Mar 16) 

MSCI detailed all the ESG regulations that have come to the market in the last decade, who implemented them and who they affected. 

Q8:  What if we cut down all the forests? (Mar 23) 

MSCI used a logistics map to show the supply chains of major producers and buyers of palm oil, one of the main drivers of deforestation. 

Q9: What if ESG disclosures become standardized? (Mar 30) 

MSCI displayed all the company disclosed and alternative data used to determine an MSCI ESG Rating for an individual company. 

Q10: Who cares about the UN Sustainable Development Goals? (Apr 6) 

MSCI looked at companies that did not publicly disclose support for an SDG but had products or services aligned with the goal; and the percentage of companies that had committed to an SDG but had also been involved in a serious controversy in the same area. 

Outline how your findings have been applied in a practical context and their wider benefits for investors or the financial system. 

While each chart focused on a different challenge, as outlined above, in totality the research aimed to answer four fundamental questions investors will need to answer in the decade to come: 

1. How will climate change affect the world?  
2. How will pandemics shape the healthcare industry?  
3. How do markets and people combine to change how companies are run?  
4. What will happen to the world of ESG as regulations and disclosure mature? 

In order for asset owners and the financial system accurately to address these new risks and opportunities, they first need to visualise how each might change their portfolio and the companies held within. These charts bring to life that need, and create a new way to interact and engage with data that could shape the future of the market. 

The number of views of the charts is still growing but, as at 12 May 2020, the project had generated over 16,000 views to the 10 questions webpage, mainly from institutional investor audiences, and 100,000 social media impressions. The charts also generated media interest:  

• The climate map ‘Who will lead the race to cut carbon?’ was featured in the FT’s Moral Money newsletter.
• The gender parity chart ‘What if gender parity is out of reach for corporate boards?’ was featured in The Telegraph: Most workers don’t know what the gender pay gap is. 
• Five of the charts features on Chinese media site Sina Finance. 
• The 10 charts were promoted via the MSCI ESG Now Podcasts available on Spotify, Apple, Google and Stitcher. 

MSCI has received positive feedback from prominent clients including a large US asset manager and well-known French corporate pension fund.