Review the MSCI methodology behind the Sustainability Characteristics and Business Involvement metrics: 1ESG Fund Ratings; 2Index Carbon Footprint Metrics; 3Business Involvement Screening Research; 4ESG Screened Index Methodology; 5ESG Controversies; 6MSCI Implied Temperature Rise
For funds with an investment objective that include the integration of ESG criteria, there may be corporate actions or other situations that may cause the fund or index to passively hold securities that may not comply with ESG criteria. Please refer to the fund’s prospectus for more information. The screening applied by the fund's index provider may include revenue thresholds set by the index provider. The information displayed on this website may not include all of the screens that apply to the relevant index or the relevant fund. These screens are described in more detail in the fund’s prospectus, other fund documents, and the relevant index methodology document.
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The Fund’s investments in Portfolio Funds are ordinarily valued based upon valuations provided by the Managers of such Portfolio Funds or, in many cases, the administrators of those Portfolio Funds. Certain securities in which the Portfolio Funds invest may not have a readily ascertainable market price and are fair valued by the Managers and/or their administrators. A Manager may face a conflict of interest in valuing such securities since their values affect the Manager’s compensation. The Advisor will review and perform due diligence on the valuation procedures used by each Portfolio Manager and BAA will monitor the returns provided by the Portfolio Funds. However, neither the Advisor nor the Board is able to confirm the accuracy of valuations provided by Managers or their administrators. Inaccurate valuations provided by Portfolio Funds could materially adversely affect the value of Shares, which determine the value at which investors acquire Shares of the Fund and the amounts that shareholders receive upon any repurchases of Shares by the Fund. Illiquid investments may be harder to value, potentially increasing risks regarding valuation.
Some of the Portfolio Funds may hold a portion of their investments, in particular investments that are illiquid, in so-called “side pockets.” Side pockets are sub-funds or other special allocations within a Portfolio Fund that create a structure to invest in illiquid or hard to value securities or other investments and are valued independently from the general portfolio with distinct allocation, distribution and redemption terms and are generally held only by those investors existing at the time of investment or at the time the side pocket is created. There is no limit to the amount that the Fund may invest in Portfolio Funds with side pockets nor on the aggregate size of side pockets. Were the Fund to request redemption from a Portfolio Fund that distributed side pocket(s) to satisfy a portion of such redemption, the portion of the Fund’s interest in the Portfolio Fund’s side pockets would generally require a much longer period of time to realize than the redemption from the main portfolio and, during the period of liquidation of the side pockets, the Fund would remain invested in the side pockets and subject to subsequent market fluctuation in the value of the side pockets. In addition, Portfolio Funds may also establish side pockets or other liquidity management allocations at the time a redemption request is made that are intended to reflect that portion of the Portfolio Fund’s investments that are deemed illiquid at that time. To the extent such redemption side pockets are created, the Fund would similarly be subject to an extended liquidation period, market risk and valuation risk.
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As an expert in sustainable investing and financial analysis, I bring a wealth of knowledge and hands-on experience in evaluating Environmental, Social, and Governance (ESG) factors within investment strategies. I have closely examined various methodologies, including those employed by leading index providers such as MSCI, to gauge sustainability characteristics, carbon footprint metrics, business involvement screening, ESG controversies, and implied temperature rise.
Let's delve into the key concepts mentioned in the article and provide a comprehensive overview:
ESG Fund Ratings:
- ESG Fund Ratings refer to the evaluation of investment funds based on their Environmental, Social, and Governance criteria.
- These ratings aim to quantify a fund's sustainability and ethical performance.
Index Carbon Footprint Metrics:
- Index Carbon Footprint Metrics measure the carbon emissions associated with the companies included in an investment index.
- This metric is crucial for assessing the environmental impact of a portfolio and aligning investments with climate-conscious goals.
Business Involvement Screening Research:
- Business Involvement Screening Research involves analyzing the extent to which companies in a portfolio are involved in certain activities or industries.
- This screening helps investors avoid businesses with controversial practices or those inconsistent with ESG principles.
ESG Screened Index Methodology:
- ESG Screened Index Methodology outlines the process of constructing an investment index by incorporating ESG criteria.
- The methodology involves selecting and weighting securities based on their ESG performance, promoting sustainable investing.
- ESG Controversies represent instances where companies face issues related to environmental, social, or governance matters.
- Investors consider these controversies when assessing the overall ESG profile of a fund or portfolio.
MSCI Implied Temperature Rise:
- MSCI Implied Temperature Rise is a metric that estimates the potential temperature increase associated with a portfolio's greenhouse gas emissions.
- This metric helps investors gauge the climate impact of their investments and align them with global warming targets.
The article emphasizes the importance of due diligence and understanding the methodology behind sustainability metrics. Investors are encouraged to refer to fund prospectuses, index methodology documents, and additional fund materials for a comprehensive understanding of the ESG screening applied and the associated risks.
Moreover, the disclaimer highlights the role of MSCI ESG Research LLC in providing information and underscores the need for careful consideration of investment objectives, risks, and charges before making investment decisions. It also mentions the potential impact of various risks associated with illiquid investments, valuation procedures, and conflicts of interest.
In conclusion, sustainable investing is a complex landscape, and investors should leverage comprehensive methodologies, such as those outlined by MSCI, to make informed decisions aligned with their values and financial goals.