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MSCI Urges Industry to Incorporate ESG Considerations into Investment Processes – Financial Post

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NEW YORK — MSCI (NYSE: MSCI), a leading provider of mission critical decision support tools and services for the global investment community, is calling for all investors globally to more readily integrate Environmental, Social and Governance (ESG) considerations throughout their investment processes if they are to mitigate the risks and identify the opportunities of a rapidly changing world and contribute to an effective and balanced transition towards a sustainable economy.

MSCI has published “The MSCI Principles of Sustainable Investing,” a framework designed to illustrate specific, actionable steps that investors can and should undertake to improve practices for ESG integration across the investment value chain. The framework includes three core pillars to full ESG integration:

  1. Investment Strategy: Asset owners should integrate ESG considerations into their processes for establishing, monitoring and revising their overall investment strategy and asset allocation.
  2. Portfolio Management: Portfolio managers should incorporate ESG considerations throughout the entire portfolio management process, including security selection, portfolio construction, risk management, performance attribution and client reporting.
  3. Investment Research: Research analysts assessing companies and issuing investment recommendations to portfolio managers should integrate ESG considerations (including ESG company ratings) into their fundamental company analysis.

This publication, which can be found on MSCI’s website, is one of many resources designed to help investors identify new investment opportunities, manage emerging risks and achieve long-term, sustainable investment performance.

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“The world is rapidly evolving due to dramatic environmental, social and governance shifts, including the effects and implications of climate change and the move to a low carbon economy, which will significantly impact the pricing of financial assets and the risk and return of investments, and lead to a large-scale re-allocation of capital over the next few decades,” said Henry Fernandez, Chairman & CEO at MSCI.

“The need for a set of guidelines that will help all investment institutions around the world manage emerging opportunities and inherent risks associated with ESG considerations in pursuit of long-term, sustainable investment performance has never been greater. MSCI is fully committed to helping investors make better decisions for a better world, and these Principles of Sustainable Investing play a part towards achieving that mission,” added Mr. Fernandez.

“Sustainable investing is a critically important part of the long-term investment process and our framework is designed to help investors understand approaches to effectively integrate ESG criteria as a core component of building a resilient portfolio,” said Remy Briand, Head of ESG at MSCI. “Through our research, tools and efforts to promote transparency, we seek to support investors in the critical quest to integrate ESG considerations in their portfolios.”

MSCI has been at the forefront of providing data, research and other tools to help enable ESG integration across the whole investment process and is committed to further advance solutions to facilitate and accelerate sustainable investing. Our research, ratings, indexes, models and portfolio analytics empower the world’s largest and most sophisticated investors in their drive to integrate ESG considerations into their investment processes.

MSCI also promotes ESG transparency across the investment value chain by making publicly available our ESG ratings of the most commonly owned companies worldwide, as well as our methodologies for determining ESG company ratings and constructing ESG indexes. By April 30, 2020, MSCI will also make public the ESG characteristics of all MSCI Equity Indexes and of the most commonly owned mutual funds.

About MSCI Inc.

MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 45 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.

This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or any third party involved in making or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information may not be modified, reverse-engineered, reproduced or redisseminated in whole or in part without prior written permission from MSCI.

The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation), the Information may not be used to create indexes, databases, risk models, analytics, software, or in connection with the issuing, offering, sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to, tracking or otherwise derived from the Information or any other MSCI data, information, products or services.

The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE INFORMATION PROVIDERS MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION (OR THE RESULTS TO BE OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH INFORMATION PROVIDER EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS, NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE INFORMATION.

Without limiting any of the foregoing and to the maximum extent permitted by applicable law, in no event shall any Information Provider have any liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited, including without limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the negligence or willful default of itself, its servants, agents or sub-contractors.

Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Past performance does not guarantee future results.

The Information should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. All Information is impersonal and not tailored to the needs of any person, entity or group of persons.

None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or any trading strategy.

It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review or otherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on, linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index Linked Investments”). MSCI makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in any Index Linked Investments.

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. 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.

The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently material differences between back tested performance results and actual results subsequently achieved by any investment strategy.

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 www.msci.com.

MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with respect to any applicable products or services from MSCI ESG Research, 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 intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. 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.

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 Standard & Poor’s. “Global Industry Classification Standard (GICS)” is a service mark of MSCI and Standard & Poor’s.

MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does it deal on its own account, provide execution services for others or manage client accounts. No MSCI ESG Research product or service supports, promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings based on published methodologies and available to clients on a subscription basis. We do not provide custom or one-off ratings or recommendations of securities or other financial instruments upon request.

Privacy notice: For information about how MSCI ESG Research LLC collects and uses personal data concerning officers and directors, please refer to our Privacy Notice at https://www.msci.com/privacy-pledge.

Contacts

Investor Inquiries
investor.relations@msci.com
Salli Schwartz +1 646 662 9343

Media Inquiries
PR@msci.com
Sam Wang +1 212 804 5244
Melanie Blanco +1 212 981 1049
Laura Hudson +44 20 7336 9653
Rachel Lai +852 2844 9315

MSCI Global Client Service
EMEA Client Service + 44 20 7618.2222
Americas Client Service +1 888 588 4567 (toll free)
Asia Pacific Client Service + 852 2844 9333

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What is Islamic halal investment and why is it on the rise?

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The global Islamic halal economy is set to reach a market value of $7.7 trillion by 2025, more than double the $3.2 trillion it reached in 2015 and significantly higher than the $5.7 trillion it was valued at less than three years ago in 2021, according to industry experts.

A report by the General Council for Islamic Banks and Financial Institutions revealed last year that the global Islamic funds market has grown by more than 300 percent over the past decade, with nearly $200bn now under management globally.

The statistics depict a rise in both demand for halal – or “sharia compliant” – investments and opportunities.

Investing is permitted under Islam, but certain aspects of investment practice – such as charging or paying interest – are not. This has traditionally meant a lack of opportunities for Muslim savers and investors in the past.

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What is halal investment?

Halal is an Arabic term meaning “permitted” and stipulating that:

  • Transactions cannot involve “riba” (interest).
  • Investments must not be made in “haram” (unlawful) assets or commodities such as pork products, alcohol or military equipment, among others.
  • Investments cannot be made based on “gharar”, which has been described as “highly uncertain transactions or transactions that run contrary to the idea of certainty and transparency in business”.

“Halal investment is basically managing your money and finances in line with your faith,” Omar Shaikh, director of Islamic Finance Council UK (UKIFC), told Al Jazeera. “Muslims believe that earning money in a way which is halal is better than earning money (even if that is more) in a way that is harmful to society and against the morals of the religion.”

Umar Munshi, co-founder and managing director of Islamic finance group Ethis, said sharia compliance is key, but institutions and investors looking for ethical investments need to go even further to ensure a business is completely ethical.

“The actions of a business must not have a negative impact on society or the environment,” Munshi told Al Jazeera. “So it’s not only compliant, but refraining from having a negative impact. Investing in a tobacco company, for example, may be sharia compliant, but it’s not good for society.”

How does halal investment work?

One example of halal investment is Islamic business financing, which works using new models of profit-sharing, sharia-compliant insurance and sukuk, an Islamic financial certificate that represents a share of ownership.

Unlike with conventional bonds – a form of IOU that investors can buy in order to receive interest payments – sukuk investors receive partial ownership of a business and then receive profit payments, which are generated over time. These payments are made instead of interest in order to ensure sharia compliancy.

“Islamic finance as a sector is barely 30 years old, with the past 15 years seeing the most development,” Shaikh from UKIFC said. “It takes time to educate and create awareness and as this has happened, more banks have focused on servicing the demand for halal investing. This in turn helps to create more products, which then creates more demand.”

Stock markets used to be the traditional modes of investment for many [Marcin Nowak/Anadolu via Getty Images]

A Goldman Sachs report published in December 2022 estimated that by 2075, five of the world’s 10 largest economies – India, Indonesia, Nigeria, Pakistan and Egypt – will have Muslim populations amounting to more than 850 million people.

As the population rises, so does its demand for financial products. According to the State of the Global Islamic Economy Report 2023, published by research group DinarStandard, some $25.9bn was invested into sharia-compliant investments in the financial year 2022-23, marking a 128 percent year-on-year growth.

“In general, it [halal investment] is on the rise. People are a lot more educated and more aware of how their dollar impacts the socioeconomic landscape globally,” said Siddiq Farid, co-founder of SmartCrowd, a real estate investment platform based in Dubai.

“They are a lot more cautious, too, hence leading to more ethical investing, which halal investing is a big component of. It’s on the rise, particularly around the younger generation. The millennials, they are a lot more aware socially. People realise exactly where their money is going and how it’s being used.”

An increase in opportunities for halal investing and their ease of access are also cited as reasons driving the rise in demand.

Israel’s war on Gaza and its impact

More recently, the rise in demand for halal investments has received an additional boost as consumers boycott brands seen as supporting Israel and its war on Gaza.

The war, which has seen more than 32,000 Palestinians killed by Israeli attacks in Gaza, has “adjusted” the mindset of these investors, Farid said.

“Halal investment has been increasing steadily and it has accelerated further in the past six months, mostly among millennials and people under 40,” he said.

“But in the past, it’s more of these people just looking for something halal. As long as it’s not haram, it’s fine. Now, there’s more awareness of not only halal, but halal aligned with values and faith. All these boycott movements have got people much more aware that something may be halal, but you might not necessarily want to use it, be associated with it or invest in it.”

bds
The Boycott, Divestment and Sanctions (BDS) movement has made many people consider where their money goes before they spend or invest it, say experts [Martin Pope/SOPA Images/LightRocket via Getty Images]

How has technology contributed to the rise of halal investing?

FinTech Magazine reported in December last year that while Muslims make up nearly a quarter of the world’s population, barely one percent of financial assets qualify as sharia compliant. This is set to change, say experts, with the arrival of “fintech” – financial technology that can make investing much more accessible for ordinary consumers and individual investors.

“Muslims are generally not as well educated when it comes to investing, and this is partly due to a lack of available options for them as Muslims. Even basic information pertaining to sharia-compliant investments is often not available to most of the Muslim population,” said Ibrahim Khan, co-founder of the online financial platform Islamic Finance Guru, in an interview with FinTech Magazine.

However, the rise of social media has contributed to an increased awareness and significant growth in sharia-compliant finance. In addition, fintech has made halal investment options, which are often much more convenient and easy to use with a smartphone or laptop, more accessible.

Consultancy group McKinsey & Company published research in January this year showing that “revenues in the fintech industry are expected to grow almost three times faster than those in the traditional banking sector between 2023 and 2028”.

“Your phone is often physically the closest thing to you. Fintechs are able to start from this paradigm and build solutions that are efficient and enhance transparency and choice for retail customers. This is where a lot of the action is at. Many banks are now creating fintech-based solutions or acquiring fintech players,” said UKIFC’s Shaikh.

Munshi added the selling point for fintechs is the age of the target audience.

“The younger generation is more open to investing online,” said Munshi, whose company operates an online platform and community for alternative finance and investment opportunities.

The same research by McKinsey & Company showed that the fintech industry raised record capital in the second half of the 2010s. Venture capital funding grew from $19.4bn in 2015 to $33.3bn in 2020, a 17 percent year-over-year increase.

As of July 2023, publicly traded fintech companies had a combined market capitalisation of $550bn, double that of 2019, the research said.

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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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Amazon doubles down on Anthropic, completing its planned $4B investment – TechCrunch

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Amazon invested a further $2.75 billion in growing AI power Anthropic on Wednesday, following through on the option it left open last September. The $1.25 billion it invested at the time must be producing results, or perhaps they’ve realized that there are no other horses available to back.

The September deal put $1.25 billion into the company in exchange for a minority stake, and certain tit-for-tat agreements like Anthropic continuing to use AWS for its extensive computation needs.

Amazon reportedly had until the end of the first quarter to decide whether to increase its investment to a maximum of $4 billion, and here we are just before the deadline, and the company has decided to throw in the maximum amount.

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Anthropic’s AI models are one of very few that compete at the highest levels of capability (however you define it) yet are available at scale for enterprises to deploy internally or in user-facing applications. OpenAI’s GPT series and Google’s Gemini are the others up there, but upstarts like Mistral may soon threaten that fragile triumvirate.

Lacking the capability to develop adequate models on their own for whatever reason, companies like Amazon and Microsoft have had to act vicariously through others, primarily OpenAI and Anthropic. The two have reaped immense benefits by allying with one or the other of these moneyed rivals, and as yet have not seen many downsides.

What we can take from Amazon’s decision to invest the maximum after (one must assume) getting a pretty close look at how they make the AI sausage over there is, really, pretty scant.

It makes too much strategic sense for these companies, which possess enormous war chests saved up for exactly this purpose (outspending rivals when they can’t out-innovate them), to pour cash into the AI sector. Right now the AI world is a bit like a roulette table, with OpenAI and Anthropic representing black and red. No one really knows where the ball will land, least of all the companies that couldn’t predict or create this technology themselves. But if your bitter enemy puts their chips down on red, it only makes sense for you to bet on black.

Especially if you can bet on black at a discount — which is what Amazon got here, since it could invest at Anthropic’s September valuation, which is most certainly lower than it is today.

That said, if things were looking sketchy over there — the way they must have looked at Inflection before Microsoft pounced on it — Amazon could have backed out or just invested less than the full supplemental $2.75 billion. But that might have sent a confusing signal no one wants getting out there, least of all existing multibillion-dollar investors.

We know Anthropic has a plan, and this year we’ll find out what Amazon, Apple, Microsoft and other multinational interests think they can do to monetize this supposedly revolutionary technology.

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