Barclays and MSCI on Tuesday introduced a series of global environmental, social and governance fixed-income indexes.
Barclays is contributing its fixed-income index expertise and MSCI its ESG research to the new indexes. The indexes are co-branded Barclays MSCI and will be independently marketed by the firms, according to a joint news release.
The new indexes represent Barclays' first venture into ESG indexes and a first for MSCI in fixed-income indexes, Brian Upbin, Barclays director in index portfolio and risk solutions, and Remy Briand, MSCI managing director and global head of index research, said in separate interviews.
The Barclays MSCI indexes “are not optimized for performance,” Mr. Upbin said. “They are designed to be rules-based, transparent, and objective representations of different ESG investment themes. An investor will still be exposed to interest-rate risk and other systematic drivers of fixed-income index returns with an ESG index or non-ESG index.”
The new indexes generally fall into three screening categories:
- The Barclays MSCI ESG Weighted indexes consist of all the securities and have the same market value as their counterpart Barclays standard indexes, such as the Barclays U.S. Aggregate. Barclays and MSCI target the ESG-weighted indexes to investors with strategies geared to the financial impact investors expect ESG factors to have on their investments.
- The Barclays MSCI Sustainability indexes select securities, such as sovereign, corporate, and quasi-sovereign, with high ESG ratings relative to their peers, screening out the others. The Barclays MSCI U.S. Corporate Sustainability index, for example, represents 2,233 securities and $1.7 trillion market value, compared with the 4,632 securities and $3.6 trillion market value of the Barclays U.S. Corporate index. These indexes are aimed at investors who apply ESG criteria to identify companies more effective in managing the ESG risks unique to their industry.
- The Barclays MSCI Socially Responsible indexes apply screens to exclude issuers for certain business activities, such as alcohol, tobacco, firearms and gambling, Mr. Upbin said. These indexes, which don't use ESG ratings for selection or exclusion, are targeted at investors using value-based policies for investment selections, Mr. Upbin said.