MSCI, a leading provider of indices to the ETF industry, has launched a new suite of equity indices that exclude firms involved in the tobacco industry. The indices are based on a number of its best-known benchmarks.

The new indices are part of MSCI’s ESG offering.

Each new index is weighted by free float-adjusted market capitalization and excludes all companies classified as producers of tobacco as well as those firms deriving 5% or more aggregate revenue from the distribution, retail, and supply of tobacco related products.

The new indices comprises tobacco-free versions of the firm’s widely followed ACWI, World, EAFE, Japan and Emerging Markets equity indices.

“There is growing demand for exclusionary indices globally, including interest among the world’s largest pension and endowment funds for tobacco exclusion benchmarks,” said Deborah Yang, Global Head of ESG Indices at MSCI.

“We are pleased to announce today the launch of a suite of Ex Tobacco Involvement Indices, which combined with our existing ESG indices, provide global clients with an array of tobacco exclusion solutions.”

While tobacco screening is one of the oldest available SRI screens, it remains very relevant today. There continue to be announcements from large investors adopting policies focused on avoiding exposure to companies with tobacco
involvement given the significant health and societal costs.

In September 2018, campaign group Tobacco Free Portfolios announced the Tobacco-Free Finance Pledge in collaboration with UNEP FI, UN PSI, UN PRI and financial institutions such as AXA, BNP Paribas, Natixis and AMP Capital. The pledge encourages the finance sector to play an active role in addressing the tobacco industry’s negative impact on global health.

Yang added, “By making this suite of indices part of the standard ESG index module offering, it makes a tobacco exclusion investment strategy easier to implement, and keeps the cost of adoption low, reducing hurdles to removing tobacco for both passive and active portfolios.”

The initial suite of indices is as follows:

MSCI ACWI ex Tobacco Involvement Index
MSCI World ex Tobacco Involvement Index
MSCI EAFE ex Tobacco Involvement Index
MSCI Japan ex Tobacco Involvement Index
MSCI EM ex Tobacco Involvement Index