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MSCI and Moody’s Partnership Signals Shift in ESG Data Landscape
A strategic partnership between Moody’s and MSCI, announced in 2024, is set to reshape how financial institutions access and utilize Environmental, Social, and Governance (ESG) data. The collaboration will spot Moody’s integrate MSCI’s sustainability content into its offerings for clients in the banking, insurance, and corporate sectors.
The move comes as demand for robust ESG data continues to grow among investors seeking to understand and manage sustainability-related risks, and opportunities. MSCI ESG Ratings, according to the company, are designed to measure a company’s resilience to financially relevant, industry-specific sustainability risks. These ratings assign companies an industry-relative letter rating from AAA to CCC, based on their management of these risks compared to peers.
Moody’s intends to migrate its existing ESG data and scores to leverage MSCI’s sustainability content. This transition aims to enhance transparency and deliver more data-driven risk solutions to its customer base. Investors, including pension funds, sovereign wealth funds, endowments, and asset managers, currently utilize MSCI ESG Ratings as part of their investment processes to inform their understanding of risk and returns.
The partnership allows investors to monitor portfolio exposures to sustainability-related risks, construct portfolios integrating financially relevant sustainability issues, and benchmark performance on these issues. MSCI’s ratings cover over 17,000 issuers and nearly one million securities globally, providing a broad and deep dataset for analysis. The focus remains on issues most relevant to a company’s core business, based on its specific industry.
Morgan Stanley’s 2023 ESG Report highlights the importance of investment banking services, including capital raising and financial advisory services, in the context of a growing focus on ESG factors. The integration of MSCI data by Moody’s is expected to support the construction of portfolios designed to enhance long-term, risk-adjusted returns.
The strategic alliance between Moody’s and MSCI underscores the increasing importance of standardized, reliable ESG data in the financial services industry. The full impact of the partnership on the competitive landscape and the availability of ESG data remains to be seen.
