Announcement for July 12, 2024 at 08:31 PM GMT

THIS IS AN ANNOUNCEMENT FOR THE MSCI GLOBAL STANDARD INDEXES

CONCLUSIONS FROM THE CONSULTATION ON POTENTIAL ENHANCEMENTS TO THE MSCI ESG LEADERS INDEXES METHODOLOGY

MSCI announced today the conclusions from its recent consultation on potential enhancements to the MSCI ESG Leaders Indexes methodology.

During the consultation, market participants were generally supportive of the proposals aimed at reducing the turnover arising from the underlying MSCI ESG Ratings data. There was also a large consensus on updating the exclusions criteria to reflect latest thinking and regulatory considerations.

Based on the balance of feedback, MSCI will implement the following changes in the MSCI ESG Leaders Indexes methodology:

1. The following changes to the ranking and selection (as per Section 3.1.2 and 3.1.3 of the methodology book) will be applied:
- Remove ESG Ratings Trend from the ranking criteria.
- Remove AA prioritization from the Top 50% selection.

2a. The following screens (as per Section 2.2.3 and Appendix 2 of the methodology book) will be updated:
- Adjust the Tobacco screen to exclude: a) all companies classified as a "Producer", as well as b) all companies deriving 5% or more aggregate revenue from the production, distribution, retail, supply and licensing of tobacco-related products.
- Adjust the Civilian Firearms screen to exclude: a) all companies classified as "Producer" of firearms and small arms ammunitions for civilian markets, as well as b) all companies deriving 5% or more aggregate revenue from the production and distribution of firearms or small arms ammunition intended for civilian use.

2b. The following additional screens will be introduced:
- Exclude all companies deriving 5% or more revenue from the production of Palm Oil.
- Exclude all companies deriving 5% or more revenue from Arctic Oil & Gas production.

All the changes described above will be implemented as part of the May 2025 Annual Index Review.

MSCI will send a separate communication to relevant clients in due course regarding the potential implementation of these changes in custom indexes.

MSCI will also make available the updated MSCI ESG Leaders Indexes methodology book prior to the implementation of aforementioned enhancements.

MSCI received mixed feedback from market participants on the proposal to introduce a carbon reduction overlay. Some market participants were supportive of the proposal and highlighted that carbon reduction is an important element of ESG integration, but some have raised questions on whether Scope 3 emissions should be incorporated in the carbon intensity metric, or whether the overlay should be applied at regional level. Other market participants were not in favor of the proposal, citing concerns on methodology complexity and reduced sector representation. Given the feedback received, MSCI will not make a decision at this stage to implement the proposed carbon reduction overlay but may seek additional feedback from market participants before the end of 2024 to assess alternate approaches to the carbon reduction mechanism as well as potential further changes to the MSCI ESG Leaders Indexes methodology.

MSCI is continuing to receive and assess feedback on whether to make index name changes and will announce its conclusions on this topic at a later date.

THIS IS AN ANNOUNCEMENT FOR THE MSCI GLOBAL STANDARD INDEXES

                                     End of announcement.
                                     Further announcements may occur as needed.