“MSCI: ‘Passive investing will be good for society’” – Financial Times – June 29, 2017

On July 6, 2017 the Financial Times reported that “after a long-running debate, MSCI decided to include mainland Chinese A-shares into its flagship emerging markets index for the first time.”

The fascinating article profiles the attitudes of Henry Fernandez, the Mexican-born chairman of MSCI towards the impact of ESG issues in China, other emerging markets and developed capital markets.

According to Mr. Fernandez, “There is no doubt that corporate governance standards need to be improved, but China is still an emerging market in the early stage of its development. We saw similar objections when Russia, Brazil, Indonesia and Mexico were included in MSCI’s emerging markets index. These governance concerns do not mean that it is impossible to find good companies to invest in.

More broadly, he explained, “We are only just beginning to understand the impact of ESG risks on the long-term sustainability of an investment. Not a week goes by without companies in every part of the world being affected by ESG issues. There is no hiding place now because of social media and there will be a backlash over the next 10 or 20 years from employees, investors and regulators that will lead to a much greater divergence in the valuations of good ESG companies and bad ESG companies.”

Registered users may read the article on the Financial Times internet site.