MSCI Inc.

This is our first report on the financial industry behemoth, MSCI. The company is a provider of critical decision-support tools and services to the global investment industry. MSCI’s stock price plunged after a disappointing result as it failed to meet the revenue expectations of Wall Street given the impact of major global headwinds. MSCI is facing a challenging period due to weakness in the ESG and Climate segment over the past few quarters. This is due to the politicization of the theme in the US and regulatory uncertainty in Europe. Although there has been a slowdown in ESG and Climate from wealth managers and retail investors, there is still healthy and steady demand from institutional investors. The slowdown in the ESG and Climate segment has come as a surprise, as it has been supporting MSCI’s elevated valuations by providing the company with outsized growth opportunities. However, it is important to note that the ESG and Climate opportunity remains a key structural driver for MSCI. ESG will continue to have a structural opportunity set in the next few years, while Climate is still in the early stages of development. Despite the lower growth in the ESG and Climate segment, MSCI still remains the best-in-class growth company within its peer group. While the outlook for ESG may be choppy for now, the structural case for the ESG and Climate segment remains resilient. We initiate coverage on the stock of MSCI, Inc. with a ‘Hold’ rating.