Asset classes

Barclays and MSCI launch range of global ESG fixed income indices

Fixed income ESG benchmark unveiled by industry players

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Banking giant Barclays and index and environmental, social and governance (ESG) firm MSCI have launched a range of a global ESG fixed income indices – believed to be the first bond benchmark indices based primarily on ESG factors.

The indices are co-branded “Barclays MSCI” and will be independently marketed by both firms. The pair had previously said they were working on the indices.

It’s hoped they will form the basis for index-linked investment products, such as exchange traded funds (ETFs), separately managed accounts and structured products.

“We expect the fixed income benchmarks to stimulate growth of ESG investment in this key asset class,” said Baer Pettit, Head of the MSCI Index Business.

The launch comes as the responsible investment industry is starting to look at fixed income (see recent RI analysis). For example, there is the so-called E-RISC initiative from the UN Environment Programme Finance Initiative and the Global Footprint Network (GFN), which is developing a methodology and metrics for integrating environmental risk into sovereign credit analysis.
And the Principles for Responsible Investment (PRI) has more than 65 signatories involved in its Fixed Income Work Stream.The PRI hopes to publish two reports on ESG risk in corporate and sovereign fixed income this year.

The new Barclays/MSCI offering comprises more than 500 standard and bespoke indices, across three categories. They are:

  • Barclays MSCI Socially Responsible Indices: exclude issuers in activities that may be restricted for certain investors.
  • Barclays MSCI Sustainability Indices: which apply a best-in-class methodology to select issuers (sovereign, corporate, and quasi-sovereign) with high ESG ratings relative to their peers. Aimed at investors who place a premium on companies’ sustainability strategies.
  • Barclays MSCI ESG Weighted Indices: use ESG ratings to systematically over-and under-weight issuers within a bond index using an objective rules-based approach. Targeted at ‘universal owners’.

There will be a fixed income and ESG session at RI Europe 2013 tomorrow titled ESG Integration asset class focus: fixed income, the forgotten giant?