msci esg rating methodology

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MSCI ESG Ratings Definition, Methodology, Example

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What Are MSCI ESG Ratings?

MSCI ESG ratings are a comprehensive measure of a company’s long-term commitment to socially responsible investments (SRI) and environmental, social, and governance (ESG) investment standards. In particular, the MSCI ESG ratings focus on a company’s exposure to financially relevant ESG risks.

ESG and SRI investing prioritize a company’s positive contributions to its community, the environment, and social impact. Scoring companies along ESG dimensions allows socially conscious investors to screen potential investments to fit with their investment goals and values.

Key Takeaways

• MSCI ESG ratings measure a company’s resilience to long-term, financially relevant ESG (environment, social, governance) risks.
• ESG investing has grown to become an important and influential investment strategy, largely motivated by values of social responsibility and corporate accountability.
• MSCI’s ESG ratings score along all three dimensions of ESG and rank potential investments on a letter-scale from AAA (leaders) to CCC (laggards).

Understanding MSCI ESG Ratings

ESG investing has become increasingly popular over the past decade. The US SIF: The Forum for Sustainable and Responsible Investment reports that in 2020, more than $17 trillion of professionally managed assets were held in sustainable assets, around one-third of all assets under management. With its growing popularity, data providers have also created various scoring criteria upon which to rank and grade potential ESG investments, allowing socially responsible investors to make more informed decisions when choosing which companies, ETFs, or mutual funds to include in their portfolios.

Alongside MSCI, several other financial firms have developed their own proprietary ESG scoring models, including Russell Investments and Standard & Poors (S&P), among others.

MSCI’s ratings decompose ESG into its three thematic components: the environment, social responsibility, and corporate governance.

Under the environmental dimension, key issues include:

• contribution to climate change
• a company’s utilization of "natural capital" (such as biodiversity and raw materials sourcing)
• pollution and waste management
• use of green technologies and renewable energy

Under social:

• health, safety, and human capital development
• product and consumer safety
• community relations
• social opportunities

And, under governance:

• corporate governance fairness and accountability
• transparency and ethics

How Do MSCI ESG Ratings Work?

Analyzing metrics within each of these key issue items, MSCI scores the companies that it rates on each key issue from zero to ten, with zero indicating virtually no exposure and ten representing very high exposure to a particular ESG risk or opportunity. MSCI also evaluates companies on exposure to controversial business activities (e.g., weapons, tobacco, gambling, etc.). The data informing these scores are obtained from corporate filings, financial statements, and press releases in addition to almost half of all data coming from hundreds of third-party media, academic, NGO, regulatory, and government sources.

Scores based on individual metrics are aggregated, weighted, and scaled to the relevant industry sector to arrive at an intuitive letter-based grade, akin to lettered credit scores issued by credit rating companies.

Source: MSCI

According to MSCI, a "leader" (rated AAA & AA) indicates a company leading its industry in managing the most significant ESG risks and opportunities. "Average" (rated A, BBB, or BB) companies are described by a mixed or unexceptional track record of managing ESG risks and opportunities relative to industry peers; while a "laggard" (rated B or CCC) trails its industry based on its high exposure and failure to manage significant ESG risks.

Real-World Example of MSCI ESG Ratings: Tesla, Inc.

To illustrate how MSCI ESG ratings can be used by investors, let’s take a look at the electric vehicle producer, Tesla, Inc. ( TSLA ). The company earns an overall grade of "A," putting it on the higher end of "average" among the 41 companies in the car industry rated by MSCI. Digging into its rating, Tesla excels in corporate governance and environmental risks, maintaining a relatively small carbon footprint while both utilizing and investing in green technologies. The company scores an average grade for product quality and safety, with the company making headlines in the past for exploding batteries, undesirable crash test ratings, and accidents involving the cars’ self-driving "autopilot" feature – although CEO Elon Musk has publicly announced a commitment to improving both driver and bystander safety.

What truly drags down Tesla’s MSCI ESG rating is its below-average score for product quality and safety. The battery banks in its cars have been known to spontaneously combust and the National Transportation Safety Board (NTSB) has accused Tesla for neglecting driver safety, calling certain Autopilot features "completely inadequate" and citing Autopilot as the probable cause of several deadly crashes involving Tesla cars.

Tesla has also been criticized for its labor management practices. For instance, the company has been found to be in violation of labor laws by blocking unionization, and that it has violated the National Labor Relations Act multiple times. More recently, the company’s leadership has come under fire for keeping plants open and unsafe during the COVID-19 pandemic, leading several of its workers to come down with the illness.

Despite earning only an "average" score, it is worth noting that only one company covered in the auto industry (including both automobiles and auto parts) currently earns "leader" status on MSCI’s ESG ratings – the French auto parts maker, Valeo SE.

What Is ESG in Investing?

Environmental, social, and governance (ESG) criteria are used to screen investments based on corporate policies and to encourage companies to act responsibly. ESG also helps investors who care about these issues to screen for those companies that rank highly in social and environmental responsibility.

What Is MSCI's Implied Temperature Rise?

MSCI has recently developed an ESG screening criterion known as Implied Temperature Rise (ITR), which is an intuitive, forward-looking metric, expressed in degrees Celsius, designed to show the temperature alignment of companies, portfolios, and funds with global temperature goals. Implied Temperature Rise can help investors assess the environmental alignment of companies, portfolios, funds, and benchmarks with net-zero carbon emissions targets by the middle of this century.

How Many Companies Does MSCI's ESG Ratings Cover?

As of 2022, MSCI has ESG ratings for more than 8,500 companies worldwide.

US SIF: The Forum for Sustainable and Responsible Investment. " The US SIF Foundation’s Biennial “Trends Report” Finds That Sustainable Investing Assets Reach $17.1 Trillion ."

S&P Global Ratings. “ ESG Evaluation ,” Page 2.

Russell Investments. " Materiality Matters ,” Page 1.

MSCI. " MSCI ESG Ratings Methodology, Executive Summary ," Page 4.

MSCI. " MSCI Sustainable Select Index Methodology ," Page 7.

MSCI. " MSCI Sustainable Select Index Methodology ," Pages 11-12.

MSCI. " MSCI ESG Ratings Methodology, Executive Summary ," Page 11.

MSCI. " ESG Ratings ."

MSCI. " ESG Ratings & Climate Search Tool: Tesla ."

Washington Post. " Tesla Model S erupts in flames, prompting NHTSA to step in ."

Reuters. " US NTSB head criticizes Tesla over vehicle self-driving feature ."

U.S. Securities and Exchange Commission. “ Notice of Exempt Solicitation Pursuant to Rule 14a-103 .”

Tesla. “ Impact Report 2020 ,” Page 56.

Tesla. “ Tesla Operational Update .”

MSCI. " ESG Ratings & Climate Search Tool: Valeo SE ."

MSCI. " What is Implied Temperature Rise (ITR)? "

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Understanding the MSCI ESG Rating Methodology: A Comprehensive Guide

As responsible investing gains momentum, understanding the MSCI ESG Rating methodology becomes essential for investors. This guide sheds light on the assessment process and its significance in making informed investment decisions.

What are MSCI ESG Ratings?

MSCI (Morgan Stanley Capital International) ESG Ratings provide investors with a comprehensive evaluation of a company's performance concerning environmental, social, and governance (ESG) factors. These ratings help investors identify potential risks and opportunities in their portfolios, enabling them to make more informed and responsible investment decisions.

Key Components of the MSCI ESG Rating Methodology

The MSCI ESG Rating methodology comprises three primary components:

Industry-Specific Key Issues: The rating process begins by identifying industry-specific key ESG issues. These issues are weighted based on their potential impact on a company's long-term value. Perform a specific search via the Materiality Map .

Company Exposure: MSCI assesses a company's exposure to each key issue, considering both its operations and supply chain. The assessment, the Thematic Exposure Standard , considers factors such as company size, location, and business activities.

Company Management: The final component evaluates a company's ability to manage its exposure to ESG risks and opportunities. MSCI analyses policies, practices, and performance metrics to determine a company's management score.

Featured Article: Top 9 ESG Courses And Certifications For Professionals

MSCI ESG Rating Scale

MSCI assigns ESG Ratings on a scale from AAA (best) to CCC (worst). Companies with higher ratings demonstrate strong ESG management practices and lower exposure to ESG risks.

AAA and AA: Leaders

A and BBB: Average performers

BB and B: Laggards

CCC: Lowest performers

Featured: How To Calculate Your Individual ESG Score

The Importance of MSCI ESG Ratings for Investors

MSCI ESG Ratings play a crucial role in responsible investing by helping investors:

Identify ESG Risks: By understanding a company's ESG rating, investors can gauge potential risks that may impact the financial performance and long-term value of their investments.

Make Informed Decisions: MSCI ESG Ratings enable investors to compare companies within the same industry, facilitating better decision-making when allocating capital to responsible investments.

Monitor Portfolio Performance: Regularly reviewing a portfolio's ESG ratings can help investors identify areas for improvement and ensure alignment with their responsible investment objectives.

The MSCI ESG Rating methodology serves as a valuable tool for investors looking to incorporate ESG factors into their investment strategy. By understanding the methodology and its implications, investors can make more informed decisions and contribute to a sustainable future.

Compare ESG performance with KnowESG's Company ESG Profiles .

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ESG Ratings Methodology

By Victoria Collin |

 Reviewed By Rebecca Baldridge |

December 14, 2022

What is an ESG Rating?

An ESG rating is a comprehensive measure that aims to assess a company’s exposure to long-term environmental, social, and governance risks. These ratings are based on information that is not typically captured by traditional financial analysis and serve as an important data point investment managers can use to screen and assess companies in their portfolios. There are several established ESG ratings providers such as Sustainalytics and MSCI that investment professionals can rely on. However, their methodologies differ. ESG ratings are also regularly used in the media, where companies are labeled as “sustainable” or “unsustainable”, as well as by regulators who might monitor for issues such as “greenwashing” (putting forward sustainability credentials that are misleading). As the awareness around ESG grows, these ratings are even used by job seekers, many of whom are increasingly concerned with the values of the companies they choose to work for.

Understand the principles underlying ESG and how they are applied to investment strategies by earning the ESG certificate . Enroll in the online course developed by 2 ex-industry practitioners, and receive a certification recognized by Wall Street.

Key Learning Points

• ESG ratings are granted by ESG Ratings providers to provide a quantifiable measure for aspects of a company that are intangible.
• ESG ratings methodologies consider the company’s exposure to various issues around environmental, social, and governance factors, the risks related to those factors, and how these risks are managed.
• The mismanagement of such risks is typically described as a “management gap” and is negatively reflected in the company’s ESG rating.
• Investment professionals use these ratings as part of their investment assessment and screening processes.
• A key issue in the ESG ratings space is the lack of a standardized framework applied across all methodologies, including consistency in reporting and data integrity.

How are ESG Ratings Determined?

The main objective of ESG rating providers in generating scores is to quantify intangible aspects of a business, which can prove difficult to measure. Therefore, an ESG score should be viewed realistically and considered a starting point rather than an absolute indicator. An ESG score is intended to help investors identify and understand financially material ESG risks to a business.

For example, Sustainalytics’ ESG Risk Ratings aim to measure the exposure of a company to industry-specific ESG risks. In addition, they try to determine how well the company is managing those risks. This method uses five categories of severity: negligible, low, medium, high, and severe. The assessment is guided by different factors, such as the company’s business model and financial strength, geography, and incident history. In order to allow investors to better compare the profiles of companies across their portfolio, Sustainalytics built a model in which exposure and management scores for different issues can be combined (or compared with each other).

Most information used to evaluate a company is publicly available. Since there is no specific requirement for companies to include ESG metrics in their reporting, it can be a challenge to obtain relevant data. Many large companies typically publish a separate sustainability report, but reveal only what they consider relevant, while smaller companies that lack resources may not report any ESG-related information.

Access the free download to see an example of an ESG rating report from Sustainalytics and Ratings Risk map.

What is an ESG Framework?

ESG frameworks are voluntary systems for standardizing the reporting and disclosure of ESG metrics. Although not mandatory, they can be required by specific investors or regulators in certain regions (mostly in Europe). ESG frameworks have been developed by industry business groups, non-profit organizations, and other international bodies such as the Global Sustainability Standards Board (GSSB); and therefore, their focus, metrics used, and recommendations may vary significantly. The Global Reporting Initiative is one of the most popular ESG frameworks that supports organizations in evaluating and communicating their impact on key issues such as climate change or human rights. Quantifiable metrics that can be reported under this framework include carbon emissions from operations and suppliers, working conditions, fair pay, financial transparency, etc.

Who Calculates ESG Ratings?

As already noted, there are established ESG ratings providers such as Sustainalytics and MSCI. Others include:

• S&P – produces a Global ESG Rank that yields a total sustainability percentile rating.
• Institutional Shareholder Services (ISS) – provide a governance score that assesses a company’s corporate governance practices.
• Bloomberg – provides an ESG disclosure score that is a proprietary rating based on a company’s ESG disclosures.

ESG Rating Methodology Comparison

Like Sustainalytics, MSCI ESG ratings are calculated busing a rules-based methodology. Companies are rated on a scale of AAA to CCC in terms of exposure to ESG risks, while also factoring in how well the company manages those risks compared to their peers.

To be considered a leader, a company must be ranked AAA to AA, which means that it manages the most significant risks and opportunities well. In contrast, companies ranked B and below (down to CCC) are considered “laggards” as they have high exposure to ESG risks. Companies that fall in the middle of the ranking (A, BBB, and BB) are considered to have an “unexceptional track record.” The specific measures used include more than 35 different elements around environmental, social, and governance concerns, for example, carbon emissions, waste, and tax transparency.

Criticism of ESG ratings

Although assessing a company’s ESG credentials can provide a good source of information and highlight its weaknesses and strengths, there is a lack of consistency between the rating scores of different providers. This is mostly due to differences in the methodologies used, which are not standardized across the sector. For example, as two of the most popular ESG rating providers, Sustainalytics and MSCI ratings should be highly correlated, but the correlation is currently below 50%. S&P and Sustainalytics ratings are more correlated but still lower than expected.

Nevertheless, the consensus is that companies that focus on environmental, social, and governance factors are in a better position to yield benefits. These may include better financial performance, easier access to capital, and lower operational and reputational risks.

Additional Resources

Equity Research vs. Investment Banking

ESG Analysts in Asset Management

Green Bonds

ESG in Credit Analysis

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Monday Morning Memo: The Change in the ESG Rating Methodology of MSCI May Have Impacts on Capital Markets

By detlef glow ..

At the end of March 2023, MSCI announced that the company will change its ESG rating methodology by removing the so-called adjustment factors (ESG momentum and ESG tail risk) from the calculation of the ESG Quality Score. These changes were made after a consultation with clients who noticed an upward shift in ESG fund ratings.

The upward shift was at least partly driven by the momentum adjustment—this factor had positive influence on the ESG Quality Score if the underlying company had disclosed improved E, S, or G practices. An increasing number of companies are starting to report on their E, S, or G practices or improving their reporting under the current demand for ESG data by investors. As a result, more companies received an ESG rating upgrade. These upgrades were magnified at the fund level by the momentum adjustment. This means that the removal of the adjustment factors will make the requirements to receive a top rating more ambitious and rigorous, as it is to be expected that companies will witness more downgrades than upgrades under the new scoring regime. Therefore, the new practice should be in favor of investors.

That said, it is clear that this change will have effects on fund flows, as those investors who want only to invest in top rated products will sell mutual funds and ETFs which will lose the top rating and buy into products which will stay in the top segment. These flows may also have impacts on the wider markets since mutual funds and ETFs with outflows need to sell the underlying securities to meet the liquidity demand from the outflows.

From my point of view these changes to the rating methodology of MSCI will increase the quality of the ESG ratings from the company. Nevertheless, actions like this show that ESG investing is still in the childhood phase and the providers of data and ratings need to adopt the ever-changing market environments to their methodologies and processes to maintain meaningful measures and ratings. As a result, all providers of ESG-related classifications, measurements, or ratings need to practice learning by doing to fulfill the increasing demand for high quality data and ratings by investors. This means that the respective providers need to review their methodologies constantly and should not be shy to implement changes needed, as this is necessary to keep the trust of investors in their measures and ratings.

This article is for information purposes only and does not constitute any investment advice.

The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.

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ESG ratings: all you need to know about MSCI rating methodology

‍ MSCI Inc. is a leading global investment research firm headquartered in New York City, offering a range of services including investment indexes, portfolio analysis tools, and ratings on ESG , equity, loans, mutual funds, ETFs, and countries.

One of its most important offerings is the MSCI ESG Ratings, which evaluate a company's ESG performance against peers and provide insights into ESG risk exposure and risk management.

As ESG factors increasingly affect investment decisions, understanding MSCI's rating methodology is crucial for companies, investors, analysts, and anyone interested in ESG investing.

In this article, we'll take a deep dive into MSCI's rating methodology, and explore how MSCI ratings can impact investment decisions.

Let's get started!

How do the MSCI ESG Ratings work?

Msci rating system.

The MSCI ESG Ratings put companies in one of seven letter categories: 

• Leader—“A company leading its industry in managing the most significant ESG risks and opportunities,” categorised as AAA or AA
• Average—“A company with a mixed or unexceptional track record of managing the most significant ESG risks and opportunities relative to industry peers,” categorised as A, BBB, or BB
• Laggard—“A company lagging its industry based on its high exposure and failure to manage significant ESG risks,” categorised as B or CCC

Process and methodology

MSCI ’s ESG ratings look at 1000+ data points (KPIs, policies, targets, etc.), considering exposure metrics (how exposed is the company to industry material issues), management metrics (how is the company managing each issue), and 35 ESG key Issues.

A specialised ESG research team provides insight throughout the rating process, and MSCI conducts systematic monitoring and quality review of information, as well as a formal committee review. 

The 35 key issues, shown in the diagram below, are centered on the intersection between a company’s unique material issues and industry-specific issues, meaning that the MSCI ESG ratings assess companies on their performance relative to peers within their industry, for more accurate comparison (all companies are assessed on Corporate Governance and Corporate Behavior).

More specific details on MSCI metric calculation and a breakdown of factors considered can be found on MSCI’s ESG Metrics Calculation Methodology page. 

While key Issues are identified by looking quantitatively at each industry as a whole, individual companies’ exposure to each issue will vary based on their business mission and scope.

MSCI ESG Ratings calculate each company’s exposure to key ESG risks across different components of a business' value chain: including core product/business segments, the locations of its operations, and other relevant measures such as outsourced production or reliance on government contracts.

For instance, MSCI states in their methodology document that while their model looks at the averages for “externalised impacts such as carbon intensity, water intensity, and injury rates,” “[c]ompanies with unusual business models … may face fewer or additional key risks and opportunities [and c]ompany-specific exceptions are allowed” in some situations.

Thus, industry-specific Key Issues may not be the same for all companies within the industry (although there should at least be significant overlap).

Company-specific data also depends on exposure and management metrics, both of which MSCI scores on a scale of 0-10. 

Issues are also weighted based on impact and time horison of their risks or opportunities. MSCI determines whether the industry is a major or minor contributor overall to an issue, and identifies a risk or opportunity as:

• ‍ short-term (less than 2 years)
• medium-term
• or long-term (5+ years)

‍ and takes that information into account when delivering ESG scores. Other considerations in MSCI ESG ratings include assessment of opportunities and controversies. 

Tools and resources

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MSCI offers tools and guides to its rating system free of charge. More details on rating methodology can be found on the MSCI ESG Ratings Methodology pdf, and the list below provides some other useful links. 

• ESG Ratings & Climate Search Tool
• ESG Industry Materiality Map
• ESG Funds Rating Search Tool 
• Index Profile Search Tool 

Who uses the MSCI ESG Ratings?

How msci clients use the esg ratings.

MSCI ESG Research is used by over 1,400 investors worldwide; the MSCI web page lists asset managers, owners, banks, corporates, insurance companies, and wealth managers among their client categories.

Due to the MSCI ESG ratings’ focus on financial materiality (eg. factors that will impact a company’s bottom line), the ratings are geared towards persons or groups that are concerned with financial performance and risk assessment.

ESG Ratings are especially helpful for investors in supplementing financial analyses, for screening select risks or sustainable practices, and as additional information on companies that are currently in an investor's portfolio. 

MSCI points out that while ESG disclosures in self-reports from individual companies offer helpful information, self-reported ESG information consists of maybe “50% of the full suite of information needed to evaluate ESG performance”.

MSCI uses other independent sources of information–such as company characteristics as defined by an outside agency, and data on product risk and event data, to name a few factors–beyond corporate disclosure to provide investors with a more detailed picture.

According to MSCI surveys, common client use of MSCI ESG ratings include: fundamental and quantitative analyses, portfolio construction, risk management, ESG benchmarking, financial index-based product development, and customer engagement and thought leadership. 

Benefits for for-profit companies

ESG ratings are not something that companies necessarily request- independent ESG rating agencies such as MSCI or Sustainalytics measure company performance with publicly available information and information sourced directly from the company.

As mentioned above, ESG ratings are especially helpful for investors and asset managers; however, companies also benefit from earning a high ESG rating. 

MSCI ESG Ratings aim to measure a company's management of financially relevant ESG risks and opportunities. High ESG score indicates that best practices are being followed in all ESG areas and a company has little to no internal or external problems.

A good ESG score signifies that a company is meeting best practices in each ESG category and has a low negative impact on people or the planet.

Conversely, a low ESG rating points to areas of concern that the company likely needs to address in order to reduce risk and remain competitive.

Companies that fail to manage ESG risks have historically experienced higher costs of capital, more volatility, and accounting irregularities.

Thus, while a low or unsatisfactory ESG score is never desirable, it can still be helpful in identifying areas for improvement. 

Even before being useful for improving practices, the research methodology behind ESG ratings can also be used by companies to start their CSR strategy.

For example, MSCI's Materiality Map can be used by a company to help identify its material CSR issues. MSCI ESG Ratings is providing a public assessment of material issues per industry. 

How can companies view or change their MSCI Rating?

MSCI ESG ratings are available online on their ESG Rating & Climate Search Tool, where interested parties can search either by company name or ticker.

MSCI monitors companies on an ongoing basis and conducts annual reviews, so companies have the opportunity to raise their ESG score each year by taking positive action on materially relevant sustainability issues and publicising the results of their actions.

Note that new information may be reflected as quickly as on a weekly basis, especially if a controversy or important governance event has occurred. 

Since ESG ratings are conducted by independent agencies with public data sources—such as companies with annual financial reports, sustainability reports , proxy reports, information from various monitored media outlets, data sets from governments, regulatory organisations, and NGOs—companies generally do not need to take the initiative in the assessment process.

MSCI does reach out to companies as a part of the data review process, and will typically alert the company 6-8 weeks in advance of MSCI’s annual ESG Rating Action update. 

Some proactive action that a company can take if they want to either join an ESG rating database or improve their rating might include:

• ‍ establishing a clear ESG governance structure to oversee the management of ESG policies and systems
• reviewing relevant publicly available data that might be used in a rating analysis, compare ESG ratings across different rating agencies
• or review agency-specific rating criteria and try reaching out to the rating agency for additional details. 

Options for facilitation and aid from third-parties

Unlock your full potential and take control of your MSCI ESG Rating with Apiday!

While independent agencies handle ESG ratings using public data sources, you can give your organisation a competitive edge by proactively establishing a strong ESG governance structure and reviewing relevant data.

Our team of experts will help you do just that.

With a tailored strategy that fits your unique goals, we'll provide a roadmap for success and streamline your ESG data collection.

Say goodbye to manual data gathering and hello to efficient, automated processes!

We'll bring all your sustainability data together, provide actionable insights, and create beautiful charts and reports that showcase your ESG performance.

Take the first step towards better ESG data management and start your journey with Apiday today!

Take control of your MSCI ESG Rating with Apiday!

Achieve your sustainability goals with our Sustainability Roadmap feature! We’ll help you easily identify risks and opportunities, prioritise actions, and track progress towards your objectives. Manage your sustainability strategy and position yourself at the forefront of responsible practices with our tool, try it today!

Frequently Asked Questions

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• ESG Ratings Methodology - MSCI
• MSCI ESG Ratings Key Issue Framework

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The Change In The ESG Rating Methodology Of MSCI May Have Impacts On Capital Markets

• MSCI announced that it will change its ESG rating methodology by removing the so-called adjustment factors (ESG momentum and ESG tail risk) from the calculation of the ESG Quality Score.
• An increasing number of companies are starting to report on their E, S, or G practices or improving their reporting under the current demand for ESG data. As a result, more companies received an ESG rating upgrade. These upgrades were magnified at the fund level by the momentum adjustment.
• The removal of the adjustment factors will make the requirements to receive a top rating more ambitious and rigorous. Therefore, the new practice should be in favor of investors.

pcess609/iStock via Getty Images

By Detlef Glow

At the end of March 2023, MSCI announced that the company will change its ESG rating methodology by removing the so-called adjustment factors (ESG momentum and ESG tail risk) from the calculation of the ESG Quality Score. These changes were made after a consultation with clients who noticed an upward shift in ESG fund ratings.

The upward shift was at least partly driven by the momentum adjustment - this factor had positive influence on the ESG Quality Score if the underlying company had disclosed improved E, S, or G practices. An increasing number of companies are starting to report on their E, S, or G practices or improving their reporting under the current demand for ESG data by investors. As a result, more companies received an ESG rating upgrade. These upgrades were magnified at the fund level by the momentum adjustment. This means that the removal of the adjustment factors will make the requirements to receive a top rating more ambitious and rigorous, as it is to be expected that companies will witness more downgrades than upgrades under the new scoring regime. Therefore, the new practice should be in favor of investors.

That said, it is clear that this change will have effects on fund flows, as those investors who want only to invest in top-rated products will sell mutual funds and ETFs which will lose the top rating and buy into products which will stay in the top segment. These flows may also have impacts on the wider markets, since mutual funds and ETFs with outflows need to sell the underlying securities to meet the liquidity demand from the outflows.

From my point of view, these changes to the rating methodology of MSCI will increase the quality of the ESG ratings from the company. Nevertheless, actions like this show that ESG investing is still in the childhood phase and the providers of data and ratings need to adopt the ever-changing market environments to their methodologies and processes to maintain meaningful measures and ratings. As a result, all providers of ESG-related classifications, measurements, or ratings need to practice learning by doing to fulfill the increasing demand for high-quality data and ratings by investors. This means that the respective providers need to review their methodologies constantly and should not be shy to implement changes needed, as this is necessary to keep the trust of investors in their measures and ratings.

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Home  /  Insights  /  In depth  /  17 years of MSCI ESG Ratings and long-term corporate performance

17 years of MSCI ESG Ratings and long-term corporate performance

In the latest update to our long-running research on the relationship between MSCI ESG ratings and corporate performance, we find that top MSCI ESG-rated companies have consistently outperformed their lower-rated peers due chiefly to better earnings fundamentals.

The new analysis , which examined MSCI ESG-rated large- and mid-cap companies in developed markets over the ratings’ 17-year history and, combined with emerging markets, over 11 years ended Dec. 29, 2023, shows that positive exposure to higher ESG-rated issuers improved financial performance before and after controlling for region, size, sector and traditional factor exposures (Exhibit 1).

It also validates MSCI ESG Ratings’ focus on financial materiality. The analysis suggests that while ESG ratings in the marketplace vary widely, with some aiming to capture objectives beyond financially relevant factors, measuring companies’ exposure to (and management of) financially relevant, industry-specific risks according to MSCI’s ESG Ratings methodology has helped investors identify firms that have outperformed the market on a risk-adjusted basis.

Exhibit 1: Cumulative performance of highest- vs. lowest-rated ESG quintiles in developed and emerging markets (cumulative return, %)

Quintiles are created every month based on adjusted scores: Pillar scores are first z-scored by Global Industry Classification Standard (GICS®) sector and region (North America, Europe, Pacific and EM sub-indexes of the MSCI ACWI Index) and then size-adjusted. For industry-adjusted ESG scores, we controlled for size and region bias. The next month’s performance (in local return) of the quintiles is calculated. The graph shows the cumulative difference between the top and bottom quintiles’ performance. Data from Dec. 31, 2012, to Dec. 29, 2023. Source: MSCI ESG Research.

While investors differ in their opinions as to which E, S and G issues matter most for corporate performance, the analysis continues to show value from the combination. “Overall, the results indicate that the industry-specific aggregation of E, S and G key issues has added financial value and consistent outperformance over time,” write my colleagues Guido Giese and Drashti Shah , who co-authored the analysis. “It is worth highlighting that while all three pillars — E, S and G — showed a positive performance effect over the study period, their aggregate scores showed the strongest performance effect.” (Exhibit 2)

Exhibit 2: Performance of highest- vs. lowest-rated ESG quintiles in developed markets (cumulative return, %)

Quintiles are created every month based on adjusted scores: Industry-adjusted ESGs scores are size-adjusted and quintiles are created per region (North America, Europe and Pacific sub-indexes of the MSCI World Index). The next month’s performance (in local return) of the quintiles is calculated. The graph shows the cumulative difference between the top and bottom quintiles’ performance. Data from Dec. 29, 2006, to Dec. 29, 2023. Source: MSCI ESG Research

The findings add to research in which we have shown that selection and weighting of key ESG risks industry by industry (as MSCI’s ESG Ratings methodology specifies) has better captured companies’ exposure to dynamic and emerging risks than a hypothetical ESG-rating methodology that simply weights E, S and G pillar sores for each company in the rating equally.

My colleagues also extend previous research on the relationship between the ESG factor and traditional equity factors — specifically its positive correlation to quality and residual volatility — in accounting for performance. In this new research, they demonstrate that the ESG factor as reflected in the MSCI Barra factor model (MSCI GEMLT ESG model) showed cumulative positive performance over the study period that cannot be explained by traditional equity factor exposures.

At the same time, it is just as important to note that the ESG factor performance showed volatility, with some very strong performance years, such as in 2019 and 2020, and some years showing underperformance (e.g., 2015 and 2023). In other words, no factor outperforms under all market conditions. ESG is no exception.

Outperformance during crises

The COVID-19 pandemic in 2020 and the start of the Russian-Ukraine War in 2022 presented MSCI ESG Ratings with two major risk events. “During both crises, positive exposure to companies with higher MSCI ESG Ratings (all other factors being controlled for) added financial performance,” note the authors.

The extent of outperformance differed, however. Notably, in the pandemic, the return that is attributed to the ESG factor, net of traditional factors such as volatility or momentum, was higher than in any of the other years of the study period. That positive effect was more muted in the second crisis: During the outbreak of the war, the ESG factor was positive but below the 11-year average.

Addressing questions about performance: industry and valuation

I am frequently asked two questions about what can explain the positive or negative performance from MSCI ESG Ratings. One is very simple to answer. The other has required a longer track record of observed behavior.

The first is whether positive and negative performance is driven by the ups and downs of the energy or tech sectors. This question is typically asked by those who are not familiar with MSCI ESG Ratings, as the ratings are by design industry-relative. That means there are highly rated and lowly rated companies in every industry, including oil and gas, health care and technology. Hence, the outperformance of higher-rated companies cannot be accounted for by a “green” industry having the preponderance of highly rated companies and a “brown” industry having the preponderance of lowly rated companies.

My colleagues examined the differences between sectors and added an interesting twist to understanding the performance differences within the three carbon-intensive sectors of utilities, materials and energy. They found that while companies with high MSCI ESG Ratings in these carbon-intensive sectors outperformed in the developed markets, they underperformed in the emerging markets.

The authors speculate that differences between developed and emerging markets in the transition away from fossil fuels and the continuing expansion in emerging markets of the use of coal for energy production may be one possible explanation.

The second question is whether MSCI ESG Ratings’ positive performance reflects fashion or crowding; that is, whether as investments have flowed into ESG-oriented funds in recent years, higher MSCI ESG-rated companies became more highly valued and potentially overpriced.

In this new analysis, my colleagues used the additional years of data to extend previous research on this question. They confirmed that between 2013 and 2023, the outperformance of companies with higher MSCI ESG Ratings was led by earnings growth, rather than by an expansion of price-to-earnings (P/E). In fact, they found that the companies with higher MSCI ESG Ratings have been growing their earnings, per unit of market cap , faster than lower-rated companies.

None of this suggests that past performance indicates future results. But as investors refine and evolve their unique approaches to integrating ESG considerations, it is important to learn from historical results of one consistent approach. Both a 17-year history with developed-market companies and the 11-year history that includes emerging-market companies have shown that a consistent approach to combining ESG attributes that are industry-specific and financially-material has produced outperformance before and after controlling for region, size and equity style-factor exposures.

Contrary to popular conjecture, the outperformance of MSCI ESG Ratings was not due either to an industry skew toward the tech sector or to increasing valuation levels. But confirming a now-prevalent view, companies with stronger management of financially material ESG issues showed greater resilience and outperformance during the two recent crises of the COVID-19 pandemic and the onset of the Russia-Ukraine war.

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MSCI Announces Results of the MSCI 2024 Market Classification Review

MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, today announced the results of the MSCI 2024 Market Classification Review.

Select highlights of this year’s review includes MSCI:

• Launching a consultation on the potential reclassification of Bulgaria from Standalone to Frontier Market status
• Continuing to monitor the implementation of measures aimed at improving the accessibility of the Korean equity market for international investors, but also noting that the recent short selling ban introduces market accessibility restrictions
• Noting recent improvement in the liquidity of the Egyptian foreign exchange market while warning on the potential implications of deteriorations reoccurring
• Continuing to monitor the market accessibility of the Bangladesh equity market
• Highlighting the evolution of clearing and settlement cycles across global markets

“In the face of market volatility, regulators in certain markets around the world have proactively advocated for elevated market accessibility standards. While we are seeing various developments and measures announced and implemented, it’s crucial that any actions toward enhancing market accessibility align with investor expectations and that no new restrictions impede any forward momentum,” said Dr. Dimitris Melas, Global Head of Index Research and Product Development and Chairman of the MSCI Index Policy Committee. “We will continue to evaluate how new and evolving reforms impact global institutional investors’ market accessibility and assess their effectiveness throughout the next market review cycle.”

More information related to the MSCI 2024 Market Classification Review, including the results of the 2024 MSCI Global Market Accessibility Review, can be viewed at www.msci.com/market-classification .

Consultation on potential reclassification of Bulgaria to Frontier Market status

MSCI announced today the launch of a consultation on a proposal for potential reclassification of Bulgaria from Standalone Market status to Frontier Market status in one step, coinciding with the May 2026 Index Review.

As part of MSCI’s August 2016 Index Review, Bulgaria was reclassified from Frontier Market status to Standalone Market status after a continuous decline in the size and liquidity of the Bulgarian equity market. At the August 2023 Index Review, MSCI implemented changes to the index construction and maintenance methodology for the MSCI Frontier Markets Indexes. These changes resulted in Bulgaria now having enough companies meeting Size and Liquidity requirements for Frontier Markets.

MSCI welcomes feedback from market participants on this reclassification proposal until April 15, 2025 and will announce its decision as part of the MSCI 2025 Market Classification Review.

Korea’s Market Accessibility

From 2008 to 2014, MSCI consulted with global market participants on the potential reclassification of Korea from Emerging Market status to Developed Market status. During this period and the time that followed, market participants highlighted key accessibility concerns including the limited convertibility of the Korean Won in the offshore currency market; the rigidity of the ID system that makes in-kind transfers and off-exchange transactions onerous; and the lack of investment instruments availability due to the restrictions on the use of exchange data for the creation of financial products.

MSCI recognizes and welcomes the recently proposed measures aimed at improving the accessibility of the Korean equity market.

• Foreign exchange market: In February 2023, improvements to the Korean foreign exchange (FX) market’s structure were announced by the Ministry of Economy and Finance (MOEF). Starting from January 2024, Registered Foreign Institutions (RFIs) are now able to participate in the onshore interbank FX market and engage in direct FX transactions with banks. The pilot operation to extend trading hours has also been initiated, with full implementation set for the latter half of this year. Additional time is required to assess the implementation of these measures and the extent to which these infrastructure improvements align the Korean FX market with global standards.
• Legal Entity Identifiers: Advancements to the capital market were announced by the Financial Services Commission (FSC) in January 2023. By the end of that year, following appropriate regulatory modifications and the development of relevant IT infrastructure, corporations began using Legal Entity Identifiers (LEI) instead of the Investor Registration Certificate (IRC) system. The requirements for reporting investment details of each final investor associated with an omnibus account holder were relaxed, and the scope of OTC transactions for ex-post reporting was broadened. However, market participants have expressed concerns about the complexity of the requirements needed to obtain an entirely validated LEI, which is creating further obstacles rather than simplifying market access for foreign investors. MSCI will continue to closely monitor the implementation of these reforms.
• Mandatory disclosures: As part of the improvement measures announced by the FSC, the first phase of the mandatory English disclosures (phased in by asset size and foreign ownership percentage) started this year. In addition, updates to dividend distribution procedures, announced by FSC and MOEF last year, were implemented in 2024. Nonetheless, only a minority of companies have embraced these measures.

It is important to note that the aforementioned reforms do not address the issues arising from the limitations imposed by the local stock exchange on the use of exchange data for financial product creation. Additionally, in November 2023, authorities enacted a full ban on short selling, introducing additional accessibility constraints.

In response to COVID-19, Korea implemented a ban on short selling on March 16, 2020. By May 2021, this prohibition was temporarily revoked for securities listed in the KOSPI 200 and KOSDAQ 150 Indexes. However, in November 2023, a full ban on short selling was reimposed. While this ban is expected to be temporary, sudden changes in market rules are not desirable.

As a reminder, potential reclassifications require that all issues have been addressed, reforms have been fully implemented, and market participants have had ample time to thoroughly evaluate the effectiveness of the changes.

Improvement in the liquidity of the Egyptian Foreign Exchange Markets

Due to low FX liquidity and the re-emergence of the FX queue, foreign investors encountered repatriation challenges in the Egyptian equity market in 2023. In May 2023, MSCI applied a special treatment for Egypt in the MSCI equity indexes. This special treatment deferred index review changes and the implementation of corporate events aiming to address index replication concerns by potentially reducing the number of changes in related indexes. MSCI also highlighted the deterioration of Egypt’s market accessibility as part of the 2023 Market Classification Review and warned that a consultation on a reclassification proposal may be launched if the market’s accessibility worsened further. In March 2024, the Central Bank of Egypt enhanced currency availability by allowing the Egyptian pound to depreciate and committing to shift to a more flexible exchange rate system. With the clearing of the FX backlog, which had been outstanding for international institutional investors since early 2023, repatriation challenges were eased. Given this material improvement in the market’s accessibility, MSCI removed the special treatment for Egypt effective June 3, 2024.

“Significant frictions in the capital repatriation process negatively impacting index replicability are considered an uncharacteristic feature within Emerging Markets,” remarked Jean-Maurice Ladure, Global Head of Index Management Research and member of the MSCI Index Policy Committee. “If Egypt were to re-encounter similar FX liquidity constraints in the near future, MSCI could consider launching an off-cycle consultation on a reclassification proposal for Egypt from Emerging Market status to Frontier or Standalone Market status.”

MSCI welcomes the aforementioned positive developments and will continue to closely monitor the onshore USD liquidity levels and the capacity of foreign investors to repatriate their capital without delays from the Egyptian market.

Market Accessibility issues in Bangladesh

In July 2022, the Bangladesh Securities and Exchange Commission (BSEC) reinstituted floor prices for all listed securities. Since then, the BSEC has gradually lifted these restrictions, yet six listed securities still retain floor prices. In addition, market participants have recently reported delays in capital repatriation due to low liquidity in the onshore FX market.

As a result of these market accessibility issues, MSCI will continue to apply the special treatment introduced in February 2023. This special treatment defers index review changes and the implementation of corporate events aiming to reduce the number of potential changes in the MSCI Bangladesh Indexes and mitigate concerns on index replicability.

MSCI continues to welcome feedback on the accessibility of the Bangladesh market and may consult with market participants in case of further developments.

Evolution in Settlement Cycles of Global Equities

The path towards shorter cycles in equity clearing and settlement mechanisms has continued. In May 2024, USA, Canada, Mexico, Argentina, and Jamaica transitioned from T+2 settlement cycles to T+1, while other markets, including the European Union, the United Kingdom, Switzerland, and Australia, are evaluating the possibility of reducing their settlement cycles to T+1 and are in a consultation/review phase.

In response to these developments, MSCI sought feedback from global market participants from December 21, 2023 to March 15, 2024 on the potential impact of these changes in their investment processes. Market participants agreed that while operational adjustments are necessary due to these changes, amendments from index providers are not required. Furthermore, there is an expectation among market participants that the trend towards shorter settlement cycles will continue, ultimately establishing T+1 as the new standard. Feedback received also reemphasized that shorter settlement cycles must not introduce further operational challenges and risk, such as pre-funding requirements. Simultaneously, it was underscored that a lack of alignment in equity settlement cycles across global markets is undesirable.

MSCI continues to closely monitor these developments.

MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com .

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Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not manage actual assets. The calculation of indexes and index returns may deviate from the stated methodology. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the index or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be different than the MSCI index performance.

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Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of the relevant index methodologies. Accordingly, constituents in MSCI equity indexes may include MSCI Inc., clients of MSCI or suppliers to MSCI. Inclusion of a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.

Data and information produced by various affiliates of MSCI Inc., including MSCI ESG Research LLC and Barra LLC, may be used in calculating certain MSCI indexes. More information can be found in the relevant index methodologies on www.msci.com .

MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor Relations section of msci.com .

MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Neither MSCI nor any of its products or services recommends, endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s products or services are not a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such, provided that applicable products or services from MSCI ESG Research may constitute investment advice. MSCI ESG Research materials, including materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. MSCI ESG and climate ratings, research and data are produced by MSCI ESG Research LLC, a subsidiary of MSCI Inc. MSCI ESG Indexes, Analytics and Real Estate are products of MSCI Inc. that utilize information from MSCI ESG Research LLC. MSCI Indexes are administered by MSCI Limited (UK).

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Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, IPD and other MSCI brands and product names are the trademarks, service marks, or registered trademarks of MSCI or its subsidiaries in the United States and other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and S&P Global Market Intelligence. “Global Industry Classification Standard (GICS)” is a service mark of MSCI and S&P Global Market Intelligence.

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Msci announces results of the msci 2024 market classification review.

NEW YORK, June 20, 2024 --( BUSINESS WIRE )--MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, today announced the results of the MSCI 2024 Market Classification Review.

Select highlights of this year’s review includes MSCI:

Launching a consultation on the potential reclassification of Bulgaria from Standalone to Frontier Market status

Continuing to monitor the implementation of measures aimed at improving the accessibility of the Korean equity market for international investors, but also noting that the recent short selling ban introduces market accessibility restrictions

Noting recent improvement in the liquidity of the Egyptian foreign exchange market while warning on the potential implications of deteriorations reoccurring

Continuing to monitor the market accessibility of the Bangladesh equity market

Highlighting the evolution of clearing and settlement cycles across global markets

"In the face of market volatility, regulators in certain markets around the world have proactively advocated for elevated market accessibility standards. While we are seeing various developments and measures announced and implemented, it’s crucial that any actions toward enhancing market accessibility align with investor expectations and that no new restrictions impede any forward momentum," said Dr. Dimitris Melas, Global Head of Index Research and Product Development and Chairman of the MSCI Index Policy Committee. "We will continue to evaluate how new and evolving reforms impact global institutional investors’ market accessibility and assess their effectiveness throughout the next market review cycle."

More information related to the MSCI 2024 Market Classification Review, including the results of the 2024 MSCI Global Market Accessibility Review, can be viewed at www.msci.com/market-classification .

Consultation on potential reclassification of Bulgaria to Frontier Market status

MSCI announced today the launch of a consultation on a proposal for potential reclassification of Bulgaria from Standalone Market status to Frontier Market status in one step, coinciding with the May 2026 Index Review.

As part of MSCI’s August 2016 Index Review, Bulgaria was reclassified from Frontier Market status to Standalone Market status after a continuous decline in the size and liquidity of the Bulgarian equity market. At the August 2023 Index Review, MSCI implemented changes to the index construction and maintenance methodology for the MSCI Frontier Markets Indexes. These changes resulted in Bulgaria now having enough companies meeting Size and Liquidity requirements for Frontier Markets.

MSCI welcomes feedback from market participants on this reclassification proposal until April 15, 2025 and will announce its decision as part of the MSCI 2025 Market Classification Review.

Korea’s Market Accessibility

From 2008 to 2014, MSCI consulted with global market participants on the potential reclassification of Korea from Emerging Market status to Developed Market status. During this period and the time that followed, market participants highlighted key accessibility concerns including the limited convertibility of the Korean Won in the offshore currency market; the rigidity of the ID system that makes in-kind transfers and off-exchange transactions onerous; and the lack of investment instruments availability due to the restrictions on the use of exchange data for the creation of financial products.

MSCI recognizes and welcomes the recently proposed measures aimed at improving the accessibility of the Korean equity market.

Foreign exchange market : In February 2023, improvements to the Korean foreign exchange (FX) market’s structure were announced by the Ministry of Economy and Finance (MOEF). Starting from January 2024, Registered Foreign Institutions (RFIs) are now able to participate in the onshore interbank FX market and engage in direct FX transactions with banks. The pilot operation to extend trading hours has also been initiated, with full implementation set for the latter half of this year. Additional time is required to assess the implementation of these measures and the extent to which these infrastructure improvements align the Korean FX market with global standards.

Legal Entity Identifiers : Advancements to the capital market were announced by the Financial Services Commission (FSC) in January 2023. By the end of that year, following appropriate regulatory modifications and the development of relevant IT infrastructure, corporations began using Legal Entity Identifiers (LEI) instead of the Investor Registration Certificate (IRC) system. The requirements for reporting investment details of each final investor associated with an omnibus account holder were relaxed, and the scope of OTC transactions for ex-post reporting was broadened. However, market participants have expressed concerns about the complexity of the requirements needed to obtain an entirely validated LEI, which is creating further obstacles rather than simplifying market access for foreign investors. MSCI will continue to closely monitor the implementation of these reforms.

Mandatory disclosures : As part of the improvement measures announced by the FSC, the first phase of the mandatory English disclosures (phased in by asset size and foreign ownership percentage) started this year. In addition, updates to dividend distribution procedures, announced by FSC and MOEF last year, were implemented in 2024. Nonetheless, only a minority of companies have embraced these measures.

It is important to note that the aforementioned reforms do not address the issues arising from the limitations imposed by the local stock exchange on the use of exchange data for financial product creation. Additionally, in November 2023, authorities enacted a full ban on short selling, introducing additional accessibility constraints.

In response to COVID-19, Korea implemented a ban on short selling on March 16, 2020. By May 2021, this prohibition was temporarily revoked for securities listed in the KOSPI 200 and KOSDAQ 150 Indexes. However, in November 2023, a full ban on short selling was reimposed. While this ban is expected to be temporary, sudden changes in market rules are not desirable.

As a reminder, potential reclassifications require that all issues have been addressed, reforms have been fully implemented, and market participants have had ample time to thoroughly evaluate the effectiveness of the changes.

Improvement in the liquidity of the Egyptian Foreign Exchange Markets

Due to low FX liquidity and the re-emergence of the FX queue, foreign investors encountered repatriation challenges in the Egyptian equity market in 2023. In May 2023, MSCI applied a special treatment for Egypt in the MSCI equity indexes. This special treatment deferred index review changes and the implementation of corporate events aiming to address index replication concerns by potentially reducing the number of changes in related indexes. MSCI also highlighted the deterioration of Egypt’s market accessibility as part of the 2023 Market Classification Review and warned that a consultation on a reclassification proposal may be launched if the market’s accessibility worsened further. In March 2024, the Central Bank of Egypt enhanced currency availability by allowing the Egyptian pound to depreciate and committing to shift to a more flexible exchange rate system. With the clearing of the FX backlog, which had been outstanding for international institutional investors since early 2023, repatriation challenges were eased. Given this material improvement in the market’s accessibility, MSCI removed the special treatment for Egypt effective June 3, 2024.

"Significant frictions in the capital repatriation process negatively impacting index replicability are considered an uncharacteristic feature within Emerging Markets," remarked Jean-Maurice Ladure, Global Head of Index Management Research and member of the MSCI Index Policy Committee. "If Egypt were to re-encounter similar FX liquidity constraints in the near future, MSCI could consider launching an off-cycle consultation on a reclassification proposal for Egypt from Emerging Market status to Frontier or Standalone Market status."

MSCI welcomes the aforementioned positive developments and will continue to closely monitor the onshore USD liquidity levels and the capacity of foreign investors to repatriate their capital without delays from the Egyptian market.

Market Accessibility issues in Bangladesh

In July 2022, the Bangladesh Securities and Exchange Commission (BSEC) reinstituted floor prices for all listed securities. Since then, the BSEC has gradually lifted these restrictions, yet six listed securities still retain floor prices. In addition, market participants have recently reported delays in capital repatriation due to low liquidity in the onshore FX market.

As a result of these market accessibility issues, MSCI will continue to apply the special treatment introduced in February 2023. This special treatment defers index review changes and the implementation of corporate events aiming to reduce the number of potential changes in the MSCI Bangladesh Indexes and mitigate concerns on index replicability.

MSCI continues to welcome feedback on the accessibility of the Bangladesh market and may consult with market participants in case of further developments.

Evolution in Settlement Cycles of Global Equities

The path towards shorter cycles in equity clearing and settlement mechanisms has continued. In May 2024, USA, Canada, Mexico, Argentina, and Jamaica transitioned from T+2 settlement cycles to T+1, while other markets, including the European Union, the United Kingdom, Switzerland, and Australia, are evaluating the possibility of reducing their settlement cycles to T+1 and are in a consultation/review phase.

In response to these developments, MSCI sought feedback from global market participants from December 21, 2023 to March 15, 2024 on the potential impact of these changes in their investment processes. Market participants agreed that while operational adjustments are necessary due to these changes, amendments from index providers are not required. Furthermore, there is an expectation among market participants that the trend towards shorter settlement cycles will continue, ultimately establishing T+1 as the new standard. Feedback received also reemphasized that shorter settlement cycles must not introduce further operational challenges and risk, such as pre-funding requirements. Simultaneously, it was underscored that a lack of alignment in equity settlement cycles across global markets is undesirable.

MSCI continues to closely monitor these developments.

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BlackRock Long-Term U.S. Equity ETF ACTIVE

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• NAV as of Jun 21, 2024 $30.18
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1. High conviction: Concentrated portfolio of primarily U.S. equity securities selected for their long-term growth outlook, including fundamentals, franchise strength, and reinvestment opportunity.

2. Established team: Actively managed by BlackRock’s Strategic Equity Team within the Fundamental Equities Portfolio Management Group.

3. Target alpha with U.S. equities: This high-active share, long-term investment strategy can be used to target outperformance within a U.S. equity allocation.

INVESTMENT OBJECTIVE

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The ETF total return may appear to diverge from the return of its benchmark. This may be due to the use of systematic fair value. Click here for more information

Portfolio Characteristics

Sustainability characteristics.

To be included in MSCI ESG Fund Ratings, 65% (or 50% for bond funds and money market funds) of the fund’s gross weight must come from securities with ESG coverage by MSCI ESG Research (certain cash positions and other asset types deemed not relevant for ESG analysis by MSCI are removed prior to calculating a fund’s gross weight; the absolute values of short positions are included but treated as uncovered), the fund’s holdings date must be less than one year old, and the fund must have at least ten securities. MSCI Ratings are currently unavailable for this fund.

Business Involvement

Business Involvement metrics can help investors gain a more comprehensive view of specific activities in which a fund may be exposed through its investments.

Business Involvement metrics are not indicative of a fund’s investment objective, and, unless otherwise stated in fund documentation and included within a fund’s investment objective, do not change a fund’s investment objective or constrain the fund’s investable universe. For more information regarding a fund's investment strategy, please see the fund's prospectus.

Review the MSCI methodology behind the Business Involvement metrics, using links below.

Business Involvement metrics are calculated by BlackRock using data from MSCI ESG Research which provides a profile of each company’s specific business involvement. BlackRock leverages this data to provide a summed up view across holdings and translates it to a fund's market value exposure to the listed Business Involvement areas above.

Business Involvement metrics are designed only to identify companies where MSCI has conducted research and identified as having involvement in the covered activity. As a result, it is possible there is additional involvement in these covered activities where MSCI does not have coverage. This information should not be used to produce comprehensive lists of companies without involvement. Business Involvement metrics are only displayed if at least 1% of the fund’s gross weight includes securities covered by MSCI ESG Research.

ESG Integration

ESG integration is the practice of incorporating financially material environmental, social and governance (ESG) data or information into the investment decision process with the objective of enhancing risk-adjusted returns of our clients’ portfolios. Unless otherwise stated in Fund documentation or included within the Fund's investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective or strategy, but rather describes how ESG data or information is considered as part of the overall investment process.

The amounts shown above are as of the current prospectus, but may not include extraordinary expenses incurred by the Fund over the past fiscal year. Amounts are rounded to the nearest basis point, which in some cases may be "0.00".

The values shown for “market value,” “weight,” and “notional value” (the “calculated values”) are based off of a price provided by a third-party pricing vendor for the portfolio holding and do not reflect the impact of systematic fair valuation (“the vendor price”). The vendor price is not necessarily the price at which the Fund values the portfolio holding for the purposes of determining its net asset value (the “valuation price”). Holdings data shown reflects the investment book of record, which may differ from the accounting book of record used for the purposes of determining the Net Assets of the Fund. Additionally, where applicable, foreign currency exchange rates with respect to the portfolio holdings denominated in non-U.S. currencies for the valuation price will be generally determined as of the close of business on the New York Stock Exchange, whereas for the vendor price will be generally determined as of 4 p.m. London. The calculated values may have been different if the valuation price were to have been used to calculate such values. The vendor price is as of the most recent date for which a price is available and may not necessarily be as of the date shown above. Please see the “Determination of Net Asset Value” section of each Fund’s prospectus for additional information on the Fund’s valuation policies and procedures.

Exposure Breakdowns

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Portfolio Managers

Alister Hibbert, Managing Director, is Head of BlackRock's Strategic Equity Team within the Fundamental Equities division of BlackRock's Portfolio Management Group, and serves on BlackRock’s Global Operating Committee.

Mr. Hibbert is founder and co-portfolio manager of the BlackRock Strategic Equity Hedge Fund Strategy. Under his leadership, the Strategy has grown to be BlackRock’s flagship equity hedge fund, winning multiple awards including Eurohedge Fund of the Year. He is also founder and co-portfolio manager of the BlackRock Global Unconstrained Equity Strategy.

Prior to establishing the Strategic Equity Team in 2020, Mr. Hibbert was a senior member of BlackRock’s European Equity Team, helping build the dominant market-share-leading franchise in Europe, and personally managing over US$15bn in the European Dynamic Strategy. As portfolio manager of this Strategy, Mr. Hibbert was a platinum winner in the Portfolio Adviser Fund Awards on multiple occasions and won Lipper Europe awards for 10 consecutive years. He was admitted to the FE Alpha Manager Hall of Fame in 2019.

Mr. Hibbert joined BlackRock in 2008, having previously served as an investment director with Scottish Widows Investment Partnership from 2005 where he was responsible for continental European portfolios. Prior to this, Mr. Hibbert was a European equity portfolio manager with Oechsle International (2004-2005) and Invesco Perpetual (1996-2004). He began his career with accountants Ernst & Young in 1994.

Mr. Hibbert holds a Bachelor of Science degree in Economics from the University of Bristol, UK, where he frequently gives talks to current students interested in careers in financial services. He is the founder and chair of a children’s education foundation, assisting schools in unofficial settlements in Africa, and serves on the Development Committee of Caterham School, UK.

Michael Constantis, CFA,  Managing Director and portfolio manager, is a member of  the Strategic Equity Team within the Fundamental Equity business of BlackRock's Portfolio Management Group. He is a founder and co-portfolio manager of the BlackRock Strategic Equity Hedge Fund Strategy. He also manages Global and European equity portfolios adopting an unconstrained investment style.

Mr. Constantis' service with the firm dates back to 2005, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006. Prior to joining MLIM, he was at Deutsche Asset Management, where he was a member of the Global Telecoms team, responsible for recommendations on major European telecom stocks.

Mr. Constantis earned a BSc degree in Economics from University College London in 2001.

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Review the MSCI methodology behind the Sustainability Characteristics and Business Involvement metrics: 1 ESG Fund Ratings ; 2 Index Carbon Footprint Metrics ; 3 Business Involvement Screening Research ; 4 ESG Screened Index Methodology ; 5 ESG Controversies ; 6 MSCI Implied Temperature Rise

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Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

If the Fund invests in any underlying fund, certain portfolio information, including sustainability characteristics and business-involvement metrics, provided for the Fund may include information (on a look-through basis) of such underlying fund, to the extent available.

Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.

The Fund is actively managed and does not seek to replicate the performance of a specified index. The Fund may have a higher portfolio turnover than funds that seek to replicate the performance of an index.

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The Fund's use of derivatives may reduce the Fund's returns and/or increase volatility and subject the Fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The Fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There can be no assurance that the Fund's hedging transactions will be effective.

Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Any applicable brokerage commissions will reduce returns. Beginning August 10, 2020, market price returns for BlackRock and iShares ETFs are calculated using the closing price and account for distributions from the fund. Prior to August 10, 2020, market price returns for BlackRock and iShares ETFs were calculated using the midpoint price and accounted for distributions from the fund. The midpoint is the average of the bid/ask prices at 4:00 PM ET (when NAV is normally determined for most ETFs). The returns shown do not represent the returns you would receive if you traded shares at other times.

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The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

Although BlackRock shall obtain data from sources that BlackRock considers reliable, all data contained herein is provided “as is” and BlackRock makes no representation or warranty of any kind, either express or implied, with respect to such data, the timeliness thereof, the results to be obtained by the use thereof or any other matter. BlackRock expressly disclaims any and all implied warranties, including without limitation, warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose.

BlackRock provides compensation in connection with obtaining or using third-party ratings and rankings.

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Bloomberg, BlackRock Index Services, LLC, Cboe Global Indices, LLC, Cohen & Steers, European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), ICE Data Indices, LLC, NSE Indices Ltd, JPMorgan, JPX Group, London Stock Exchange Group (“LSEG”), MSCI Inc., Markit Indices Limited, Morningstar, Inc., Nasdaq, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), Nikkei, Inc., Russell, S&P Dow Jones Indices LLC or STOXX Ltd. None of these companies make any representation regarding the advisability of investing in the Funds. With the exception of BlackRock Index Services, LLC, who is an affiliate, BlackRock Investments, LLC is not affiliated with the companies listed above.

Neither FTSE, LSEG, nor NAREIT makes any warranty regarding the FTSE Nareit Equity REITS Index, FTSE Nareit All Residential Capped Index or FTSE Nareit All Mortgage Capped Index. Neither FTSE, EPRA, LSEG, nor NAREIT makes any warranty regarding the FTSE EPRA Nareit Developed ex-U.S. Index, FTSE EPRA Nareit Developed Green Target Index or FTSE EPRA Nareit Global REITs Index. “FTSE®” is a trademark of London Stock Exchange Group companies and is used by FTSE under license.

© 2024 BlackRock, Inc. BLACKROCK, BLACKROCK SOLUTIONS, BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, FACTORSELECT, iTHINKING, iSHARES CONNECT, FUND FRENZY, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES, the iShares Core Graphic, CoRI and the CoRI logo are trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

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Extended viewer, how real-estate debt funds have fared in the downturn.

While some real-estate investors have been waiting for clear signals on when it may be prudent to dive back into the market during this period of heightened uncertainty , some have been paying closer attention to potentially more attractive opportunities further up the capital stack. Real-estate debt has attracted interest from investors in recent times due to the higher-interest-rate environment and the perception of more-stable returns in a period of falling values.

Performance across strategies

The notion of more-stable returns was borne out by the inaugural results of the newly launched MSCI Europe Quarterly Private Real Estate Debt Fund Index, which reported a return of 3.7% for the year ending December 2023. The performance was predominantly influenced by senior-lending funds, which returned 5.8% and constituted 53% of the net asset value (NAV) of the funds tracked by the index. Whole-loan funds also performed well, with a 7.4% return, making up 28% of the tracked NAV.

In contrast, subordinated/mezzanine loan funds, which represent 16% of the NAV, experienced a decline, recording a -8.6% return for 2023. This was slightly better than the MSCI Pan-European Quarterly Property Fund Index (PEPFI), which posted a -9.3% total return for the same period. The subordinated/mezzanine loan funds have shown a performance profile similar to equity funds over the debt index’s history. However, these loan funds were more severely affected than PEPFI funds during the COVID-19 crisis (which was driven by short-term disruption to income) but were slower to sink into negative territory during the current market correction.

Real-estate debt funds more resilient than equity funds in 2023

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Investors are still waiting for a recovery in commercial real estate. We outline the state of play in early 2024 and identify potential signposts for an upturn in the asset class.

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Senior-debt funds led 2023 private-asset performance, followed by mezzanine debt. We summarize the leaders and the laggards from the Q4 2023 update of the Burgiss Manager Universe, and chart the trend in private-equity distributions. 

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Blackrock long-term u.s. equity etf active.

You can trade this ETF now.

• NAV as of Jun 21, 2024 $30.18
• 1 Day NAV Change as of Jun 21, 2024 0.04 (-%)
• Fees as stated in the prospectus Expense Ratio: 0.75%

1. High conviction: Concentrated portfolio of primarily U.S. equity securities selected for their long-term growth outlook, including fundamentals, franchise strength, and reinvestment opportunity.

2. Established team: Actively managed by BlackRock’s Strategic Equity Team within the Fundamental Equities Portfolio Management Group.

3. Target alpha with U.S. equities: This high-active share, long-term investment strategy can be used to target outperformance within a U.S. equity allocation.

INVESTMENT OBJECTIVE

Performance, growth of hypothetical $10,000, distributions.

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The ETF total return may appear to diverge from the return of its benchmark. This may be due to the use of systematic fair value. Click here for more information

Portfolio Characteristics

Sustainability characteristics.

To be included in MSCI ESG Fund Ratings, 65% (or 50% for bond funds and money market funds) of the fund’s gross weight must come from securities with ESG coverage by MSCI ESG Research (certain cash positions and other asset types deemed not relevant for ESG analysis by MSCI are removed prior to calculating a fund’s gross weight; the absolute values of short positions are included but treated as uncovered), the fund’s holdings date must be less than one year old, and the fund must have at least ten securities. MSCI Ratings are currently unavailable for this fund.

Business Involvement

Business Involvement metrics can help investors gain a more comprehensive view of specific activities in which a fund may be exposed through its investments.

Business Involvement metrics are not indicative of a fund’s investment objective, and, unless otherwise stated in fund documentation and included within a fund’s investment objective, do not change a fund’s investment objective or constrain the fund’s investable universe. For more information regarding a fund's investment strategy, please see the fund's prospectus.

Review the MSCI methodology behind the Business Involvement metrics, using links below.

Business Involvement metrics are calculated by BlackRock using data from MSCI ESG Research which provides a profile of each company’s specific business involvement. BlackRock leverages this data to provide a summed up view across holdings and translates it to a fund's market value exposure to the listed Business Involvement areas above.

Business Involvement metrics are designed only to identify companies where MSCI has conducted research and identified as having involvement in the covered activity. As a result, it is possible there is additional involvement in these covered activities where MSCI does not have coverage. This information should not be used to produce comprehensive lists of companies without involvement. Business Involvement metrics are only displayed if at least 1% of the fund’s gross weight includes securities covered by MSCI ESG Research.

ESG Integration

ESG integration is the practice of incorporating financially material environmental, social and governance (ESG) data or information into the investment decision process with the objective of enhancing risk-adjusted returns of our clients’ portfolios. Unless otherwise stated in Fund documentation or included within the Fund's investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective or strategy, but rather describes how ESG data or information is considered as part of the overall investment process.

The amounts shown above are as of the current prospectus, but may not include extraordinary expenses incurred by the Fund over the past fiscal year. Amounts are rounded to the nearest basis point, which in some cases may be "0.00".

The values shown for “market value,” “weight,” and “notional value” (the “calculated values”) are based off of a price provided by a third-party pricing vendor for the portfolio holding and do not reflect the impact of systematic fair valuation (“the vendor price”). The vendor price is not necessarily the price at which the Fund values the portfolio holding for the purposes of determining its net asset value (the “valuation price”). Holdings data shown reflects the investment book of record, which may differ from the accounting book of record used for the purposes of determining the Net Assets of the Fund. Additionally, where applicable, foreign currency exchange rates with respect to the portfolio holdings denominated in non-U.S. currencies for the valuation price will be generally determined as of the close of business on the New York Stock Exchange, whereas for the vendor price will be generally determined as of 4 p.m. London. The calculated values may have been different if the valuation price were to have been used to calculate such values. The vendor price is as of the most recent date for which a price is available and may not necessarily be as of the date shown above. Please see the “Determination of Net Asset Value” section of each Fund’s prospectus for additional information on the Fund’s valuation policies and procedures.

Exposure Breakdowns

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Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares ETF and BlackRock Fund prospectus pages. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal. Before engaging Fidelity or any broker-dealer, you should evaluate the overall fees and charges of the firm as well as the services provided. Free commission offer applies to online purchases of select iShares ETFs in a Fidelity account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain Fidelity Brokerage Services platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”). ©2024 BlackRock, Inc. All rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, iTHINKING, iSHARES CONNECT, FUND FRENZY, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES , the iShares Core Graphic, CoRI and the CoRI logo are registered and unregistered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners. iCRMH0424U/S-3489128

Portfolio Managers

Alister Hibbert, Managing Director, is Head of BlackRock's Strategic Equity Team within the Fundamental Equities division of BlackRock's Portfolio Management Group, and serves on BlackRock’s Global Operating Committee.

Mr. Hibbert is founder and co-portfolio manager of the BlackRock Strategic Equity Hedge Fund Strategy. Under his leadership, the Strategy has grown to be BlackRock’s flagship equity hedge fund, winning multiple awards including Eurohedge Fund of the Year. He is also founder and co-portfolio manager of the BlackRock Global Unconstrained Equity Strategy.

Prior to establishing the Strategic Equity Team in 2020, Mr. Hibbert was a senior member of BlackRock’s European Equity Team, helping build the dominant market-share-leading franchise in Europe, and personally managing over US$15bn in the European Dynamic Strategy. As portfolio manager of this Strategy, Mr. Hibbert was a platinum winner in the Portfolio Adviser Fund Awards on multiple occasions and won Lipper Europe awards for 10 consecutive years. He was admitted to the FE Alpha Manager Hall of Fame in 2019.

Mr. Hibbert joined BlackRock in 2008, having previously served as an investment director with Scottish Widows Investment Partnership from 2005 where he was responsible for continental European portfolios. Prior to this, Mr. Hibbert was a European equity portfolio manager with Oechsle International (2004-2005) and Invesco Perpetual (1996-2004). He began his career with accountants Ernst & Young in 1994.

Mr. Hibbert holds a Bachelor of Science degree in Economics from the University of Bristol, UK, where he frequently gives talks to current students interested in careers in financial services. He is the founder and chair of a children’s education foundation, assisting schools in unofficial settlements in Africa, and serves on the Development Committee of Caterham School, UK.

Michael Constantis, CFA,  Managing Director and portfolio manager, is a member of  the Strategic Equity Team within the Fundamental Equity business of BlackRock's Portfolio Management Group. He is a founder and co-portfolio manager of the BlackRock Strategic Equity Hedge Fund Strategy. He also manages Global and European equity portfolios adopting an unconstrained investment style.

Mr. Constantis' service with the firm dates back to 2005, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006. Prior to joining MLIM, he was at Deutsche Asset Management, where he was a member of the Global Telecoms team, responsible for recommendations on major European telecom stocks.

Mr. Constantis earned a BSc degree in Economics from University College London in 2001.

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Important Information

Review the MSCI methodology behind the Sustainability Characteristics and Business Involvement metrics: 1 ESG Fund Ratings ; 2 Index Carbon Footprint Metrics ; 3 Business Involvement Screening Research ; 4 ESG Screened Index Methodology ; 5 ESG Controversies ; 6 MSCI 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.

Certain information contained herein (the “Information”) has been provided by MSCI ESG Research LLC, a RIA under the Investment Advisers Act of 1940, and may include data from its affiliates (including MSCI Inc. and its subsidiaries (“MSCI”)), or third party suppliers (each an “Information Provider”), and it may not be reproduced or redisseminated in whole or in part without prior written permission. The Information has not been submitted to, nor received approval from, the US SEC or any other regulatory body. The Information may not be used to create any derivative works, or in connection with, nor does it constitute, an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy, nor should it be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Some funds may be based on or linked to MSCI indexes, and MSCI may be compensated based on the fund’s assets under management or other measures. MSCI has established an information barrier between equity index research and certain Information. None of the Information in and of itself can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. Neither MSCI ESG Research nor any Information Party makes any representations or express or implied warranties (which are expressly disclaimed), nor shall they incur liability for any errors or omissions in the Information, or for any damages related thereto. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

If the Fund invests in any underlying fund, certain portfolio information, including sustainability characteristics and business-involvement metrics, provided for the Fund may include information (on a look-through basis) of such underlying fund, to the extent available.

Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.

The Fund is actively managed and does not seek to replicate the performance of a specified index. The Fund may have a higher portfolio turnover than funds that seek to replicate the performance of an index.

Convertible securities are subject to the market and issuer risks that apply to the underlying common stock.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets or in concentrations of single countries.

The Fund's use of derivatives may reduce the Fund's returns and/or increase volatility and subject the Fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The Fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There can be no assurance that the Fund's hedging transactions will be effective.

Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Any applicable brokerage commissions will reduce returns. Beginning August 10, 2020, market price returns for BlackRock and iShares ETFs are calculated using the closing price and account for distributions from the fund. Prior to August 10, 2020, market price returns for BlackRock and iShares ETFs were calculated using the midpoint price and accounted for distributions from the fund. The midpoint is the average of the bid/ask prices at 4:00 PM ET (when NAV is normally determined for most ETFs). The returns shown do not represent the returns you would receive if you traded shares at other times.

Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

Certain sectors and markets perform exceptionally well based on current market conditions and iShares and BlackRock Funds can benefit from that performance. Achieving such exceptional returns involves the risk of volatility and investors should not expect that such results will be repeated.

Distribution Yield and 12m Trailing Yield results may have period over period volatility due to factors including tax considerations such as treatment of passive foreign investment companies (PFICs), treatment of defaulted bonds or excise tax requirements; exceptional corporate actions; seasonality of dividends from underlying holdings; significant fluctuations in fund shares outstanding; or fund capital gain distributions.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

Although BlackRock shall obtain data from sources that BlackRock considers reliable, all data contained herein is provided “as is” and BlackRock makes no representation or warranty of any kind, either express or implied, with respect to such data, the timeliness thereof, the results to be obtained by the use thereof or any other matter. BlackRock expressly disclaims any and all implied warranties, including without limitation, warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose.

BlackRock provides compensation in connection with obtaining or using third-party ratings and rankings.

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Bloomberg, BlackRock Index Services, LLC, Cboe Global Indices, LLC, Cohen & Steers, European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), ICE Data Indices, LLC, NSE Indices Ltd, JPMorgan, JPX Group, London Stock Exchange Group (“LSEG”), MSCI Inc., Markit Indices Limited, Morningstar, Inc., Nasdaq, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), Nikkei, Inc., Russell, S&P Dow Jones Indices LLC or STOXX Ltd. None of these companies make any representation regarding the advisability of investing in the Funds. With the exception of BlackRock Index Services, LLC, who is an affiliate, BlackRock Investments, LLC is not affiliated with the companies listed above.

Neither FTSE, LSEG, nor NAREIT makes any warranty regarding the FTSE Nareit Equity REITS Index, FTSE Nareit All Residential Capped Index or FTSE Nareit All Mortgage Capped Index. Neither FTSE, EPRA, LSEG, nor NAREIT makes any warranty regarding the FTSE EPRA Nareit Developed ex-U.S. Index, FTSE EPRA Nareit Developed Green Target Index or FTSE EPRA Nareit Global REITs Index. “FTSE®” is a trademark of London Stock Exchange Group companies and is used by FTSE under license.

© 2024 BlackRock, Inc. BLACKROCK, BLACKROCK SOLUTIONS, BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, FACTORSELECT, iTHINKING, iSHARES CONNECT, FUND FRENZY, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES, the iShares Core Graphic, CoRI and the CoRI logo are trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

iCRMH0624U/S-3584719