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Lights, camera, action

MSCI gets inspired by movies and books for its ESG themes

Benjamin Braddock, left, played by Dustin Hoffman, gets some advice in ‘The Graduate.’

Index provider and analytics firm MSCI Inc. has turned to characters from the worlds of movies and books to help explain its environmental, social and governance themes for this year.

The 2019 ESG Trends to Watch paper highlighted five main issues to watch for.

The first is "The other trade war: plastic waste," in which MSCI explores the idea that companies and investors will be forced to contend with a new reality this year: that waste reduction is not a marketing priority but a business challenge. MSCI turned to 1967 movie "The Graduate" to help illustrate the point. "Just one word: Plastics," they wrote, quoting character Mr. McGuire.

The second theme is illustrated with a quote by John McClane, hero of the 1988 movie "Die Hard." "Welcome to the party, pal!" is used to demonstrate regulating the business of ESG investing, with regulators set to "ramp up scrutiny."

For the theme of the not-so-distant future for climate risk, MSCI draws on the 1954 book "The Fellowship of the Ring" by J.R.R. Tolkien, in which main character Frodo Baggins said: "I wish it need not have happened in my time."

This year will see "the end of the argument that time is on our side." MSCI warned that theme will be most evident in private assets such as real estate.

The fourth theme, the big signal revolution, is demonstrated by 1989 bestselling book "One Up On Wall Street," in which author Peter Lynch wrote: "Know why you own it."

Data availability will be the easy part of analysis. "The hard part — and the important part — will be knowing how to identify and apply the most relevant signals and achieve better-differentiated investment objectives," the MSCI paper said.

The final theme, leadership in the age of transparency, draws on a quote by business management guru Peter F. Drucker. "The CEO is the link between the inside that is 'the organization,' and the outside of society, economy, technology, markets and customers."

MSCI said this year will see investors stop asking questions of company boards once a scandal has hit, instead asking before: "What are my rights?"