HUMAN RIGHTS CUSTOM INDEX ON MSCI ACWI*

Transcription

1 INDEX METHODOLOGY HUMAN RIGHTS CUSTOM INDEX ON MSCI ACWI* * A custm index calculated by MSCI based n custm human rights screens using MSCI ESG Research [Szerző] May 2017 MAY 2017

2 CONTENTS 1 Intrductin Screening Criteria Cnstructing the Human Rights Custm Index n MSCI ACWI Underlying Universe Exclusin Criteria Maintaining the Human Rights Custm Index n MSCI ACWI Index Reviews Onging Event-Related Maintenance... 6 Appendix I: Human Rights Vilatins Criteria... 7 Appendix II: Cntrversial Regimes Appendix III: Mst Cntrversial Regimes MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 2 OF 16

3 1 INTRODUCTION The Human Rights Custm Index n MSCI ACWI is an index based n client-specified custmized ESG screening criteria. The index aims t exclude cmpanies directly implicated in certain serius human rights vilatins. The index is free flat-adjusted market capitalizatin weighted MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 3 OF 16

4 2 SCREENING CRITERIA The Human Rights Custm Index n MSCI ACWI aims t exclude cmpanies that are implicated in certain serius human rights vilatins r with substantial, strategic invlvement with regimes with pr human rights recrds. Please refer t Appendix 1 fr mre details n these criteria MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 4 OF 16

5 3 CONSTRUCTING THE HUMAN RIGHTS CUSTOM INDEX ON MSCI ACWI 3.1 UNDERLYING UNIVERSE The selectin universe fr the Human Rights Custm Index n MSCI ACWI is the MSCI ACWI Index, a glbal equity index cnsisting f develped and emerging market cuntries. 3.2 EXCLUSION CRITERIA Cmpanies that are invlved in certain serius human rights vilatins r that supprt repressive regimes as described in Sectin 2 are excluded frm the Human Rights Custm Index n MSCI ACWI MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 5 OF 16

6 4 MAINTAINING THE HUMAN RIGHTS CUSTOM INDEX ON MSCI ACWI 4.1 INDEX REVIEWS The Human Rights Custm Index n MSCI ACWI is reviewed n a quarterly basis t cincide with the regular Semi-Annual and Quarterly Index Reviews f the MSCI Glbal Investable Market Indexes. The changes are implemented as f the clse f the last business day f February, May, August and Nvember. The lists f cmpanies t be excluded are screened based n MSCI ESG Research data as f the end f January, April, July and Octber, respectively. Fr sme securities, such data may nt be published by MSCI ESG Research by the end f the mnth preceding the Index Review. Fr such securities, MSCI will use ESG data published after the end f mnth, when available, fr the rebalancing f the Human Rights Custm Index n MSCI ACWI. At index reviews, all cmpanies in the underlying universe are reviewed and eligible cmpanies are added t the Human Rights Custm Index n MSCI ACWI. Existing cnstituents are deleted frm the Human Rights Custm Index n MSCI ACWI if they have been added t the exclusin list. In additin, any cnstituent that is deleted frm the underlying index as a result f an index review is als deleted frm the Human Rights Custm Index n MSCI ACWI. 4.2 ONGOING EVENT-RELATED MAINTENANCE The MSCI Crprate Events Methdlgy is applied fr the maintenance f the Human Rights Custm Index n MSCI ACWI between index reviews. Cmpanies deleted frm the underlying index between index reviews are simultaneusly deleted frm the Human Rights Custm Index n MSCI ACWI. Cmpanies added t the underlying index between index reviews are simultaneusly added t the Human Rights Custm Index n MSCI ACWI. Their inclusin is reviewed at the fllwing Index Review, as described in sectin 4.1. The details relating t the handling f specific crprate event types can be fund in the MSCI Crprate Events Methdlgy bk available at: MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 6 OF 16

7 APPENDIX I: HUMAN RIGHTS VIOLATIONS CRITERIA MSCI ESG Research evaluates cmpanies fr exclusin frm the Human Rights Custm Index n MSCI ACWI based n tw sets f ratings criteria: Supprt fr Cntrversial Regimes and Human Rights Vilatins. Supprt fr Cntrversial Regimes The first set f criteria fcuses n cmpanies whse business peratins prvide substantial material supprt fr a limited set f gvernments with extremely pr human rights recrds. Substantial Material Supprt MSCI ESG Research defines substantial material supprt by the fllwing criteria: Invlvement with key branches f the gvernment, such as the military r ther security frces. Invlvement in sectrs f the ecnmy which are strategically imprtant fr the regime, such as energy, mining, and pwer. Mst Cntrversial Regimes The identificatin f the mst cntrversial regimes by MSCI ESG Research is based n the fllwing research steps: Filter # 1: Classificatin f an initial set f cntrversial regimes MSCI ESG Research uses the mst current Freedm Huse Freedm in the Wrld rankings t identify an initial set f cntrversial regimes. The initial set is thse cuntries that scre the wrst in this ranking. See Appendix 2 fr a full listing f these cuntries and mre details n the scring methdlgy. Filter # 2: Cuntries Targeted By Sanctins Frm the results f filter #1, MSCI filters fr cuntries that, largely because f their extremely pr human rights recrds, have had ecnmic sanctins and/r arms embarges impsed by at least tw f the fllwing rganizatins: the U.N., U.S., and the E.U. Filter # 3: Cuntries Targeted By Divestment Campaigns r Human Rights NGOs Frm the results f filters #1 & #2, MSCI ESG identifies cuntries that meet at least ne f the fllwing tw criteria: 2017 MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 7 OF 16

8 a) Legislatin by at least three gvernments (natinal r reginal) mandating pensin fund divestment frm cmpanies supprting targeted regimes. b) At least tw f the fllwing fur widely respected internatinal human rights NGOs allege severe human rights abuses, including accusatins f gvernment culpability crimes against humanity r gencide. Amnesty Internatinal, Human Rights Watch, United t End Gencide, Gencide Watch Filter # 4: Final Assessment Human Rights Vilatins Fr thse cuntries that meet filter # 3 exclusively based n NGO assessments f gencide r crimes against humanity (item 3b. abve), MSCI ESG Research further assesses whether the cuntries meet the fllwing cnditin: The allegatins f gencide r crimes against humanity invlve the natinal gvernment. See Appendix 3 fr the final MSCI ESG Research list f mst cntrversial cuntries as f September The secnd set f criteria fr exclusin centers n cmpanies that are directly implicated in extreme human rights vilatins. Examples include the fllwing: Extra-judicial killings f cmpany emplyees r members f a lcal cmmunity where a cmpany facility is lcated. The use f trture, rape and ther types f physical abuse by cmpany security frces (r third party security frces) invlving cmpany emplyees r members f a lcal cmmunity where a cmpany facility is lcated. Vilatins f free, prir and infrmed cnsent standards cncerning the impact f existing r prpsed cmpany peratins n lcal cmmunities. This includes peratins that have resulted in the frced relcatins f villages and prpsed peratins that radically threaten an existing way f life fr indigenus peples. Research Prcess MSCI ESG Research utilizes its prprietary ESG cntrversies assessment research service MSCI ESG Impact Mnitr t identify cmpanies n the MSCI ACWI that meet the abve human rights criteria MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 8 OF 16

9 MSCI ESG Research analysts cnduct mnthly searches f media, gvernment and NGO surces fr new infrmatin regarding the human rights perfrmance f all cmpanies in the MSCI ACWI Index. Analysts use a wide range f infrmatin tls and surces t perfrm updates, including: Prprietary web-crawling technlgy Cmpany websites Cmpany Annual Reprts and regulatry filing dcuments Media search services Business directries NGO reprts and websites Gvernment agencies and disclsure Financial data prviders Direct cmmunicatin with cmpanies MSCI ESG Research reviews and updates the criteria fr mst cntrversial regimes nce per year. This includes reviewing the annual update t the Freedm Huse Freedm in the Wrld rankings when they are published during the first half f each year. In additin, surces are checked quarterly t keep abreast f recent develpments cncerning sanctins, legislated divestment campaigns and NGO criticisms MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 9 OF 16

10 APPENDIX II: CONTROVERSIAL REGIMES Cuntry Name Plitical Rights Civil Liberties Freedm Huse Nt Free Assessment Afghanistan 6 6 X Bahrain 6 6 X Belarus 7 6 X Burma 7 6 X Camern 6 6 X Chad 7 6 X China 7 6 X Cte d'ivire 6 6 X Cuba 7 6 X Demcratic Republic f the Cng 6 6 X Equatrial Guinea 7 7 X Eritrea 7 7 X Ethipia 6 6 X Gaza Strip 6 6 X Iran 6 6 X Las 7 6 X Libya 7 6 X Nrth Krea 7 7 X Saudi Arabia 7 7 X Smalia 7 7 X Suth Ossetia 7 6 X Sudan 7 7 X 2017 MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 10 OF 16

11 Syria 7 7 X Tibet 7 7 X Transnistria 6 6 X Turkmenistan 7 7 X United Arab Emirates 6 6 X Uzbekistan 7 7 X Western Sahara 7 7 X Yemen 6 6 X Zimbabwe 6 6 X N.B. The cntent fr the table abve was prvided by Freedm Huse. Freedm Huse Key: MSCI ESG Research bases this initial list n the wrst perfrming cuntries n Freedm Huses Freedm in the Wrld ranking. Freedm Huse is a glbally recgnized authrity n assessing cuntrylevel effectiveness in prtecting fundamental human rights. The U.S.-based rganizatin was funded in 1941 and began prducing its widely respected Freedm in the Wrld reprt in the 1970s. Fr mre infrmatin abut Freedm Huse, please g t the fllwing: T qualify fr MSCI ESG Research s initial set f cntrversial regimes, a cuntry must scre >= 6 n bth f the tw scring pillars. Freedm Huse Scring Mdel: Plitical Rights: 1= tp scre, 7=wrst scre. Freedm Huse assesses a cuntry n this issue by reviewing three subcategries: Electral Prcess, 2017 MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 11 OF 16

12 Plitical Pluralism and Participatin, Functining f Gvernment. Rating f 6: Cuntries and territries with a rating f 6 have very restricted plitical rights. They are ruled by ne-party r military dictatrships, religius hierarchies, r autcrats. They may allw a few plitical rights, such as sme representatin r autnmy fr minrity grups, and a few are traditinal mnarchies that tlerate plitical discussin and accept public petitins. Rating f 7: Cuntries and territries with a rating f 7 have few r n plitical rights because f severe gvernment ppressin, smetimes in cmbinatin with civil war. They may als lack an authritative and functining central gvernment and suffer frm extreme vilence r warlrd rule that dminates plitical pwer. Civil Liberties: Freedm Huse assesses a cuntry n this issue by reviewing fur subcategries: Freedm f Expressin and Belief, Assciatinal and Organizatinal Rights, Rule f Law, Persnal Autnmy and Individual Rights. Rating f 6: Cuntries and territries with a rating f 6 have very restricted civil liberties. They strngly limit the rights f expressin and assciatin and frequently hld plitical prisners. They may allw a few civil liberties, such as sme religius and scial freedms, sme highly restricted private business activity, and sme pen and free private discussin. Rating f 7: Cuntries and territries with a rating f 7 have few r n civil liberties. They allw virtually n freedm f expressin r assciatin, d nt prtect the rights f detainees and prisners, and ften cntrl r dminate mst ecnmic activity MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 12 OF 16

13 APPENDIX III: MOST CONTROVERSIAL REGIMES Cuntry Name Burma Iran Sudan Syria 2017 MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 13 OF 16

14 The fllwing sectins have been mdified since September 2012: Sectin 4: Maintaining the Human Rights Custm Index n MSCI ACWI Clarificatin n use f ESG data fr securities whse data wuld be available after the end f the mnth preceding Index Review MSCI Inc. All rights reserved. Please refer t the disclaimer at the end f this dcument. MSCI.COM PAGE 14 OF 16

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