MSCI is a leading provider of socially responsible investing indices that funds use to monitor, and determine, their investments. The firm made headlines last week when it dropped Caterpillar from several of its indices. Today, MSCI issued a statement to explain the move, here it is in full:
Caterpillar Inc. (ticker: CAT) was removed from several MSCI ESG indices due to an Environmental, Social and Governance (ESG) rating downgrade. The company was removed from MSCI World ESG Index, MSCI USA ESG Index and MSCI USA IMI ESG Index on March 1, 2012, following the February Index Review.
MSCI ESG Indices are managed using transparent, rules-based methodologies that are publicly available on www.msci.com. To determine the composition of the indices, MSCI utilizes ESG ratings and other information compiled by MSCI ESG Research. The overall ESG rating reflects analysis of multiple environmental, social and governance factors.
Caterpillar’s ESG rating was downgraded in February 2012. The key factors determining the rating include a January 2012 labor dispute and subsequent plant closing in Canada, an on-going controversy associated with use of the company’s equipment in the occupied Palestinian territories, management of environmental issues, and employee safety. As a result of the downgrade, the company’s ESG rating fell below the minimum level required to remain in the MSCI ESG Indices. In accordance with index rules, Caterpillar was removed from the MSCI ESG Indices at the ensuing Index Review.