Another Black Eye for ESG in MSCI’s Mass Downgrade
A change in methodology will see ratings on thousands of funds lowered, highlighting once again the problems with such scores.
Changing colors.
Source: Bloomberg
Tens of thousands of funds that have changed nothing about their investment approach are about to see their environmental, social and governance scores lowered — a poor look for an $8.4 trillion market in the US that’s struggling to be seen as bona fide.
MSCI Inc., regarded as ESG’s most influential gatekeeper, recently said it’s overhauling the way it evaluates some 31,000 exchange-traded and other funds, resulting in the sweeping downgrades. As a result, just 54 funds will have the highest ESG rating, or AAA, down from 1,120, according to the Financial Times. More than 400 ETFs that use swaps will lose their ESG score entirely as MSCI reconsiders how to assess them.