MSCI Moves to Innovate ESG and Climate Offering
Data provider appoints former Trucost CEO Richard Mattison to accelerate initiatives and develop fresh strategies for sustainable investing.
Faced with a toughening market environment, MSCI has doubled down on its ambitions to expand and enhance its sustainability-related product suite by bringing on additional experience to steer its effort.
The data, indexes and analytics provider recently named Richard Mattison as Head of ESG and Climate, who is tasked to collaborate throughout the company to drive innovation, scale-up products, and develop integrated solutions to support clients’ sustainable investment strategies.
“My main focus is to ensure that clients are served with data, analysis and relevant benchmarks on sustainability, transition finance, resilience and physical risks and nature,” Mattison told ESG Investor. “I am focused on partnering with core teams across our business to continue to identify opportunities to develop innovative products and strategies that reflect the evolving sustainable investment landscape.”
Mattison has more than 20 years of sustainable finance experience and previously served as President of S&P Global’s Sustainable1 unit. He was CEO of climate analytics company Trucost from 2001 until it was acquired by S&P Global in 2016.
And Mattison’s deep expertise is sought-after by sustainability-focused initiatives and institutions globally. He is currently a senior advisor to the Taskforce on Nature-related Financial Disclosures, having also served as a member of the EU’s High Level Expert Group on Sustainable Finance and the People’s Bank of China’s Green Finance Taskforce.
“Over the last two decades working in sustainable finance, I’ve seen first-hand that successfully integrating sustainability and climate change considerations into decision-making processes is critical if investors, banks and companies are to fully understand risks and opportunities in a rapidly evolving global economy,” said Mattison. “This means having the right data, solutions and actionable insights to rely on.”
In recent years, the ESG data and analytics market has become a multi-billion-dollar industry, driven by forces including the expansion of sustainability disclosure frameworks and regimes – such as the Task Force on Climate Related Financial Disclosures and EU’s Sustainable Finance Disclosures Regulation – and the exponential growth of ESG integrated and sustainability-labelled funds, ETFs, and other indexed financial products.
This fuelled a period of intense innovation and competition to meet growing demand from investors followed by market consolidation. More recently, demand has inevitably slowed in a maturing market with clients becoming increasingly sophisticated and demanding, while also facing greater cost pressures.
Concerns around ratings methodology, data quality, and conflicts of interest have led to greater supervisory scrutiny in the codes of conduct as well as new regulations. These include a European regulation covering ESG ratings and a code of conduct for data and ratings providers created by the International Capital Market Association and the International Regulatory Strategy Group.
Further challenges are posed to existing business models and product offerings are posed by the development of public data utilities for climate and nature and the expected flow of audited and standardised sustainability information generated by the regulations such as the EU Corporate Sustainability Reporting Directive and adoption of reporting requirements set out by the International Sustainability Standards Board.
Both asset owners and asset managers have called on commercial data providers to improve their offerings. According to a recent report from FTSE Russell, asset owner confidence in the availability of ESG data has increased but almost two in five flagging issues around data quality. As such, major players are increasingly looking to evolve their value propositions to investors.
“Richard’s experience in sustainable finance, coupled with his proven track record in delivering innovative solutions, uniquely positions him to deliver on our commitment to helping investors meet their sustainability and climate goals,” said Alvise Munari, Chief Product Officer at MSCI. “His leadership will not only drive our initiatives forward but also inspire new strategies that align with the evolving sustainable investment landscape.”
Expanding its offering
MSCI’s ESG Research unit works with more than 2,650 clients globally and provides ratings for more than 10,000 companies. The firm’s ESG and climate operating revenues have seen steady growth this year, standing at US$83.6 million in Q3, up from US$79.9 million in Q2, with the growth attributed to demand for climate, ratings, and screening products.
The global ESG data and analytics market has been forecast to cross US$2 billion by 2030, with ESG and climate products being MSCI’s fastest-growing revenue segment over the past five years, contributing 11.4% of the firm’s total revenues last year.
One of MSCI’s foremost offerings is its public ESG Ratings & Climate corporate search tool, which allows users to search more than 2,900 companies that are constituents of the MSCI All Country World Index. The tool can help users identify ESG and climate risks and opportunities faced by firms, including decarbonisation targets, ESG controversies, ESG ratings, and net alignment with Sustainable Development Goals.
During the last year, one area of expansion for MSCI has been data products to support participants in the carbon credit markets. In September, the firm released a new tool, MSCI Carbon Ratings, to enable buyers, investors and developers of carbon credits to better assess the quality and integrity of carbon projects. It assesses more than 4,000 projects in the global carbon credit market offering investment-grade analysis of the associated integrity and risks involved in each of them.
This expansion was partly enabled by the October 2023 acquisition of carbon markets intelligence provider Trove Research, which has helped MSCI to expand its climate solutions offering and bolster its voluntary carbon market expertise, broadening the firm’s climate proposition and answering corporate and institutional investor demand.
“You can’t manage what you can’t measure [and] MSCI’s role is to provide critical intelligence to market participants to enable them to make more informed decisions,” said Mattison. “Data and tools are central to helping investors understand risk, assess opportunities, meet their sustainability and climate goals and turn their commitments into action.
“There is a strong innovation pipeline in place and I’m excited to work with clients to realise the potential of these innovations and product launches over the next few months,” he added.
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