Index provider MSCI has launched five new global equity indices, tracking companies aligned with themes that are expected to have a significant impact on society and the economy in the future.
Stephane Mattatia, Head of Index Products EMEA and Global Thematic Index Products, MSCI
The themes are smart cities, digital economy, future mobility, disruptive technology, and millennials.
The indices complement the firm’s existing ‘megatrend’ suite which consists of benchmarks focused on the themes of cyber-security, robotics, ageing societies, and efficient energy.
The indices are available for licensing and are suitable to serve as the underlying for new investment products such as ETFs.
Each new index is based on the MSCI ACWI universe which provides broad global equity coverage across 23 developed and 26 emerging market countries.
The methodology screens the parent universe to identify companies aligned with the relevant theme. It analyses firms’ descriptions of their business segments, as put forth in their annual reports, searching for keywords linked to the theme. Companies with business segment names that include at least one relevant word make it through to the next round.
MSCI then derives an economic relevance score for each firm to assess the strength of the company’s link to the theme. This is based on the percentage of revenue derived from the eligible business segments as well as the cumulative frequency of keywords in public descriptions of the company’s business activities. Firms with economic relevance scores of at least 25% will be selected to form the index.
Constituents are weighted according to the product of their economic relevance score and their float-adjusted market capitalization with issuer weights capped at 5%. Index reconstitution and rebalancing occur semi-annually, while the words used to determine index eligibility are reviewed annually.
Stephane Mattatia, Head of Index Products EMEA and Global Thematic Index Products at MSCI, commented, “It is widely acknowledged that there are a number of megatrends which will significantly impact the global economy and societies around the world, and we’re seeing increasing demand from investors seeking to align their investments to these long-term themes. This new suite of indexes provides them with the tools they need to assess and measure these structural trends.”
The indices
The MSCI ACWI IMI Smart Cities Index tracks companies that are positively exposed to the shift towards smart cities including smart connectivity, smart infra, smart buildings and homes, smart safety and security, smart mobility, and smart waste and water management.
The MSCI ACWI IMI Digital Economy Index tracks companies that derive significant revenues from the digital economy value chain including digital payments, robotics, cybersecurity, e-commerce, the sharing economy, social media, and cloud computing.
The MSCI ACWI IMI Future Mobility Index tracks companies that are positively exposed to the sub-themes of electrochemical energy storage technologies, autonomous vehicles, electric vehicles, and mining companies that produce metals used to manufacture batteries.
The MSCI ACWI IMI Disruptive Technologies Index tracks “disruptive technology” companies that are broadly classified under the sub-themes of 3D printing, the Internet of Things, cloud computing, fintech, digital payments, healthcare innovations, robotics, cybersecurity, clean energy, and smart grids.
The MSCI ACWI IMI Millennials Index tracks companies that are positively exposed to the spending power and preferences of the “millennial” generation. These companies encompass a broad range of categories including popular brands, health and fitness, travel and leisure, social media and entertainment, housing and home goods, financial services, food and dining, and clothing and apparel.