METHODOLOGY DOCUMENT

MSCI ESG RESEARCH LLC

Carbon Emissions
Estimation
Methodology and definitions

MSCI ESG Research LLC

July 2023

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Contents

Introduction ................................................................................................................. 3
Background on carbon emissions ................................................................................ 3
Carbon emissions estimation models .......................................................................... 5
Estimating carbon emissions: scope 1+2 ......................................................................... 5
Production model ............................................................................................................ 5
Company-specific intensity model ................................................................................. 6
Industry segment-specific intensity model ................................................................... 7
Emissions estimate for companies with zero revenues............................................... 9
Confidence level of industry segment carbon intensities ........................................... 9
Estimating carbon emissions: scope 3 upstream (legacy model) ................................ 10
Estimating carbon emissions: scope 3 downstream for automobile manufacturers
(legacy model) ................................................................................................................... 11
Enterprise Value including cash (EVIC) intensity ........................................................ 13
EVIC use case ..................................................................Error! Bookmark not defined.
Carbon emission estimates update cycle ....................................................................... 13
EVIC / Emission intensities over EVIC Update Cycle .................................................. 14
Appendices................................................................................................................ 15
Appendix 1: Estimation logic for different cases ............................................................ 15
Appendix 2: Estimation key combination logic for scope 1+2 ...................................... 18
Appendix 3: Historical methodology changes ................................................................ 20
Appendix 4: Reported vs. estimated data in MSCI World .............................................. 22
Appendix 5: Reported vs. estimated data in MSCI EM ................................................... 23
Appendix 6: Reported vs. estimated data in MSCI ACWI ............................................... 24
Appendix 7: Reported vs. estimated data in MSCI ACWI Investable Market Index (IMI)
............................................................................................................................................. 25
Appendix 8: Reported vs. estimated data in MSCI BBG Barclays Global Agg Corporate
............................................................................................................................................. 26

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Introduction
Rising concentration in greenhouse gases (GHGs) in the atmosphere due to anthropogenic activities
has contributed significantly to detrimental climate change effects.1 In order to reduce the negative
impacts of climate change, world leaders in December 2015 through the Paris Agreement decided to
limit global warming this century to 2 degrees Celsius, compared with a pre-industrial period (1861-
1880) benchmark, and to pursue efforts to limit the warming further to 1.5 degrees Celsius.2 The
Paris Agreement requires all member countries to reduce their greenhouse gas emissions (or
carbon emissions3) and strengthen these efforts in the years ahead.
MSCI ESG Research collects carbon emissions (in other words, greenhouse gas emissions) data for
the companies in our coverage universe. Data is collected once per year from most recent corporate
sources, including Annual Reports, Corporate Social Responsibility Reports, or websites. In addition,
MSCI ESG Research uses the carbon emissions data reported through CDP (formerly the Carbon
Disclosure Project) or government databases when reported data is not available through direct
corporate disclosure.
When companies do not disclose data, MSCI ESG Research uses proprietary methodologies to
estimate Scope 1, Scope 2, Upstream Scope 3, and Downstream Scope 34 carbon emissions.

Background on carbon emissions

Carbon emissions are classified per the Greenhouse Gas Protocol (GHG Protocol).5 The greenhouse
gases included in the GHG Protocol along with their global warming potential (GWP) coefficient as
per Intergovernmental Panel on Climate Change (IPCC) are given below:

Exhibit 1: Greenhouse gases and global warming potential relative to CO2

100-year Global Warming Potential
Greenhouse Gas
(CO2e)6
Carbon Dioxide (CO2) 1

Methane (CH4) 28

Nitrous Oxide (N2O) 265

Hydrofluorocarbons (HFCs) 4 – 12,400

Perfluorocarbons (PFCs) 6,630 – 17,400

1IPCC, 2018: Summary for Policymakers. In: Global Warming of 1.5°C.

https://www.ipcc.ch/site/assets/uploads/sites/2/2019/05/SR15_SPM_version_report_LR.pdf
2 The Paris Agreement, https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
3Greenhouse gas emissions, GHG emissions and carbon emissions are used interchangeably. In this document, we have primarily
used “carbon emissions” to denote greenhouse gas emissions.
4 For Automobile Manufacturers in MSCI ACWI Index involved in the light vehicle manufacturing.

5 Greenhouse Gas Protocol, https://ghgprotocol.org/corporate-standard

6Fifth Assessment Report, IPCC, 2014
https://www.ipcc.ch/site/assets/uploads/2018/02/WG1AR5_Chapter08_FINAL.pdf

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Sulphur Hexafluoride (SF6) 23,500

Nitrogen Trifluoride (NF3) 16,100

Source: MSCI ESG Research
Per the GHG Protocol, emissions of these gases are grouped in three categories known as Scope 1,
Scope 2 and Scope 3 and are often expressed as “carbon equivalent emissions” or “carbon dioxide
equivalent emissions.” In detail:
− Scope 1 carbon emissions are those directly occurring "from sources that are owned or
controlled by the institution, including: on-campus stationary combustion of fossil fuels;
mobile combustion of fossil fuels by institution owned/controlled vehicles; and "fugitive"
emissions. Fugitive emissions result from intentional or unintentional releases of GHGs,
including the leakage of hydrofluorocarbons (HFCs) from refrigeration and air conditioning
equipment as well as the release of methane (CH4) from institution-owned farm animals."
− Scope 2 carbon emissions are "indirect emissions generated in the production of electricity
consumed by the institution."
− Scope 3 carbon emissions encompass all other indirect emissions that are "a consequence
of the activities of the institution but occur from sources not owned or controlled by the
institution" such as commuting; waste disposal; embodied emissions from extraction,
production, and transportation of purchased goods; outsourced activities; contractor-owned
vehicles; and line loss from electricity transmission and distribution."
As per the GHG Protocol, Scope 3 carbon emissions can be classified into two broad categories:
- Upstream Scope 3 emissions: defined as indirect carbon emissions related to purchased or
acquired goods and services; and
- Downstream Scope 3 emissions: defined as indirect carbon emissions related to sold goods
and services.
The GHG Protocol further divides these two categories into 15 sub-categories, as described below:
Upstream Scope 3 Emissions:
1 Purchased goods and services
2 Capital goods
3 Fuel and energy-related activities
4 Upstream transportation and distribution
5 Waste generated in operations
6 Business travel
7 Employee commuting
8 Leased assets (upstream)
Downstream Scope 3 Emissions:
9 Downstream transportation and distribution
10 Processing of sold products

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11 Use of sold products

12 End-of-life treatment of sold products
13 Leased assets (downstream)
14 Franchises
15 Investments

Carbon emissions estimation models

Estimating carbon emissions: scope 1+2
MSCI collects carbon emissions data reported by companies – the process and update cycle for the
reported emissions are detailed in the Climate Change Metrics Methodology document. However, to
ensure consistency, MSCI estimates emissions if a company's reporting does not align with the GHG
Protocol framework, or does not represent emissions across all its geographies and operations. To
do so, we apply our proprietary Scope 1+2 Carbon Emissions Estimation models, which are
described below. The same applies for companies that do not report Scope 1+2 Carbon Emissions
data.

Under MSCI ESG Research’s Scope 1+2 carbon emissions estimation approach, data disclosed by
companies (current and historical) is used to estimate carbon emissions intensity at the company
level and at the industry segment level. Our estimation model for Scope 1+2 carbon emissions has
three distinct modules.

MSCI ESG Research estimates a company’s carbon emissions using one out of following three
models in the given order of preference. Scope 1 and Scope 2 emissions are separately estimated,
which allows us to consider partly disclosed data (e.g. only Scope 1 or Scope 2) and use the best
model, from below-mentioned options, after considering the disclosed data availability.

1 Production model (E.PROD)

2 Company-specific intensity model (E.CSI)
3 Industry segment-specific intensity model (E.Segmt)
We start with the Production model (E.PROD), which we currently use for electric utilities to estimate
direct emissions due to power generation. This model uses power generation fuel mix data to
estimate Scope 1 emissions. For companies not involved in power generation, we start with the
company-specific intensity model (E.CSI), which is based on data previously reported by the
company. If the company does not report and has never reported greenhouse gas emissions, we use
the industry segment-specific intensity model (E.Segmt) which is based on the estimated carbon
intensities for 1,000+ industry segments. Each model is described below in more detail.

Production model
For power generating electric utilities, we use power generation fuel-mix data to estimate the carbon
emissions due to its power generation activities. In the first step, we collect reported data on total
power generation by fuel type under following categories:

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1. Coal
2. Liquid Fuels
3. Natural Gas
4. Nuclear Power
5. Renewable Energy
In Exhibit 2, power generation by fuel type for a sample company is shown in column 2. In the next
step, we apply appropriate carbon emissions factors over the fuel-mix data to estimate the Scope 1
emissions for electric utilities (column 3 and 4). It can be observed that direct emissions due to
power generation for this company are estimated as 120.2 million tons of CO2 equivalent.

Exhibit 2: Carbon emissions estimation using the Production model

Power generation mix Emission factor Carbon emissions
of a sample company (tons CO2e/MWh) (tons CO2e)
Fuel type (MWh)

Coal 80,220,000 1.02 81,824,000

Liquid Fuels 0 0.758 0

Natural Gas 74,490,000 0.515 38,362,350

Nuclear Power 30,560,000 0 0

Renewable Energy 5,730,000 0 0

Source: MSCI ESG Research

Company-specific intensity model

For companies that have reported carbon emissions data in the past but not for all years, we
calculate a company-specific intensity based on this data using the following steps:

1. Based on the historical reported carbon emissions and revenue data, we first estimate the
‘company-specific carbon emission intensity’ (Exhibit 3: Column 1 to 5). This intensity is
computed as the harmonic mean of reported carbon intensities in the last five years. We use
the harmonic mean because it is less affected by large outliers.

2. In the next step, we apply revenue of the year with missing carbon emission data to
company-specific carbon emissions intensity to estimate the carbon emissions for that year
(Exhibit 3: Column 6 and 7).

Because these estimates are based on data previously reported by the company, they already reflect
the specifics of the businesses and geographies in which the company operates and its own
production processes. However, we do not use this model for companies that have undergone
corporate actions (for example, mergers & acquisitions) even if such companies have reported data
in the past and for companies that have not reported emissions for more than 5 years because the
reported data may not represent the company’s current operational characteristics.

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Exhibit 3: Carbon emissions estimation using the Company-specific carbon intensity model
Year Sales Reported Reported Company- Estimation Emissions
(mil carbon carbon specific carbon – underlying (tons)
USD) emissions intensity intensity calculations
(tons) (tons/mil (tons/mil
USD) USD)

Not 983,000
2014 25,033 983,000 39.27 35.66
Required (Reported)

Not 885,557
2015 27,788 885,557 31.87 35.66
Required (Reported)

Not 1,151,271
2016 31,046 1,151,271 37.08 35.66
Required (Reported)

Not 1,196,940
2017 33,939 1,196,940 35.27 35.66
Required (Reported)

35.66 x 1,249,784
2018 35,046 - - 35.66
35,046 (E.CSI)

Source: MSCI ESG Research

Industry segment-specific intensity model

For companies that have not reported any carbon emissions data in the past, we use an industry
segment-specific intensity model. From the reported data set, we estimate average carbon
emissions intensity for 1,000+ industry segments using company-specific carbon emission
intensities. This model has the following steps:

a) Estimate average carbon emissions intensity for 1,000+ industry segments using company-
specific carbon emission intensities.
i. To estimate the carbon intensity of an industry segment, we first identify a set of
companies with reported current and/or historical carbon emissions data and
deriving majority of their revenue from this industry segment. We use a combination
of Global Industry Classification Standard (GICS®)7 and Standard Industrial
Classification (SIC) to determine this industry segment set.
ii. In the next step, we compute company-specific carbon emission intensities for
companies in this industry segment set. This process is detailed out above in the
‘Company-specific intensity model’ section.

7GICS, the global industry classification standard developed by MSCI Inc. and S&P Global. GICS is a service mark of MSCI Inc and
S&P Global

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iii. Within each industry segment set, we then remove the companies which have
intensities below the 10th percentile or above the 90th percentile (outliers) (Exhibit
4, column 2-5).
iv. After removing the outliers, for each industry segment we calculate the average
carbon intensity of companies falling between the 10th and 90th percentile (Exhibit
4, row 11).

b) Apply these average intensities to each of the company’s reported industry segments for the
year in question and multiply each intensity figure by the relevant segment’s revenue to
calculate estimated emissions for each industry segment (Exhibit 4). Please note the
process for estimating the carbon intensity of segment 1 of a given company Z is explained
in Exhibit 5.

c) In the final step, we sum the estimated emissions for each industry segment to calculate the
company’s total estimated carbon emissions for the year in question (Exhibit 5).

Please note that prior to 2015 emissions estimates, industry segment-specific carbon intensities
were estimated at GICS® Sub-Industry level rather than at industry segment level.

Exhibit 4: Estimating industry segment carbon intensity using the Industry segments specific
intensity model
S.No. Name of Company- Exclude/Keep (remove Intensities
company specific carbon outliers falling in top and bottom after
intensity (tons decile) removing
/ mil. USD) outliers

1 Company A 26.5 Keep 26.5

2 Company B 23.2 Keep 23.2
3 Company C 31.6 Keep 31.6
4 Company D 8.6 Exclude (below 10th percentile) -
5 Company E 185.8 Exclude (above 90th percentile) -
6 Company F 35.2 Keep 35.2
7 Company G 27.8 Keep 27.8
8 Company H 26.7 Keep 26.7
9 Company I 29.9 Keep 29.9
10 Company J 30.4 Keep 30.4
11 Industry segment carbon intensity (tons / mil. USD) 28.9

Source: MSCI ESG Research

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Exhibit 5: Emissions estimation using industry segment carbon intensities for a given Company Z

Company’s Industry Segment Industry Segment Industry

industry segment revenue (mil. USD) Carbon Intensity (tons Segment
/ mil USD) Carbon
Emissions
(tons)
Segment 1 1,017.8 28.9 29,414.4
Segment 2 641.4 12.9 8,274.1
Total 1,659.2 22.7 37,688.5

Source: MSCI ESG Research

Emissions estimate for companies with zero revenues

For emissions estimations purposes, MSCI uses companies’ net sales or revenues. Revenues may
be zero for companies in a development/R&D stage. For companies that, for example, may have
incurred large losses in their trading/investment income and report negative revenues, MSCI
attributes revenues as zero.

For companies that do not disclosure revenues or with zero revenues, estimated absolute emissions
are not generated, only the industry average GICS Sub-Industry emissions intensities are attributed.

Confidence level of industry segment carbon intensities

To determine the confidence level of the estimated industry segment intensities, we calculate the
coefficient of variance (CV = standard deviation (SD) of company-specific intensities / segment
carbon intensity). The standard deviation for an industry segment is computed after removing the
outliers. We have set five levels of confidence in the results, as shown in the table below, the highest
when the coefficient of variance is less than 0.25, and the lowest when it is above 1.00.

Exhibit 6: Confidence levels of industry segment-specific carbon intensities

Coefficient of Variance Confidence Level

0.00 to less than 0.25 High

0.25 to less than 0.50 Moderately High

0.50 to less than 0.75 Moderate

0.75 to less than 1.00 Moderately Low

Above 1.00 Low

Source: MSCI ESG Research

Confidence level of company carbon estimates

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To arrive at the confidence level in the estimated carbon emissions at company level, we compute
the CV at the company level. For a company with two industry segments, CV is computed using
following formula:
√𝑅12 𝑥 𝑆𝐷12 + 𝑅22 𝑥 𝑆𝐷22
𝐶𝑉𝑡𝑜𝑡𝑎𝑙 =
𝐸
Where:
R1 = Revenue from first industry segment
R2 = Revenue from second industry segment
SD1 = Standard deviation of estimated carbon intensity for first industry segment
SD2 = Standard deviation of estimated carbon intensity for second industry segment
E = Estimated carbon emissions at company level
CVtotal = Coefficient of Variance at company level

Estimating carbon emissions: scope 3 upstream (legacy model)

MSCI ESG Research collects reported Scope 3 emissions where available. In addition, we started to
estimate scope 3 upstream carbon emissions data for all companies in our coverage in 2017.
For estimating Scope 3 upstream emissions, we use an industry segment-specific intensity model.
The model uses the following steps:

1. Estimate Scope 3 upstream carbon emissions intensity for 1,000+ industry segments using
(1) the company-reported upstream Scope 3 emissions intensity data and (2) the carbon
intensity data provided by the Comprehensive Environmental Data Archive (CEDA).8

2. Apply these average intensities to each of the company’s reported industry segments for the
year in question and multiply each intensity figure by the relevant segment’s revenue to
calculate estimated emissions.

3. Sum the estimated emissions for each business segment to calculate the company’s total
estimated carbon emissions for the year in question.

4. In addition to the total upstream Scope 3 emissions that include emissions associated with
both direct (Tier 1) and indirect suppliers, we also provide the Tier 1 upstream Scope 3
emissions that consider direct suppliers only. To estimate the Tier 1 upstream Scope 3
emissions, we first compute the ratio of Tier 1 upstream Scope 3 emissions intensity and the
total upstream Scope 3 emissions intensity using the CEDA data. In the next step, we
estimate the Tier 1 upstream Scope 3 carbon emissions intensity for 1,000+ industry
segments by multiplying this ratio with the Scope 3 upstream emissions intensity computed
in Step 1. We then follow the calculations similar to Step 2 and Step 3 to estimate the Tier 1
upstream Scope 3 carbon emissions.

8The Comprehensive Environmental Data Archive (CEDA) is a suite of environmentally extended input-output databases that are
designed to assist various environmental systems analyses and Life Cycle Assessments (LCA), including carbon footprinting, water
footprinting and embodied energy analysis. The dataset is developed by Industrial Ecology Research Services (IERS) LLC.

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Please note that MSCI’s Climate Risk Center has introduced a different Scope 3 estimation model9 in
May 2020, which has its own methodology document and a quarterly update cycle.
Factors associated with the legacy Scope 3 estimation model continue to be available on ESG
Manager, but the data is no longer refreshed.

Estimating carbon emissions: scope 3 downstream for automobile

manufacturers (legacy model)
For automobile manufacturers, Scope 3 downstream carbon emissions resulting from the use of
their sold products could form a substantial part of their overall carbon footprint. In order to
estimate this category of emissions (Scope 3 downstream emissions due to “use of sold products”),
we follow the guidelines in the GHG Protocol,10 using the following formula:

CO2 emissions from use of sold products = ∑ total lifetime expected uses of producti x number of
product sold in reporting periodi x fuel consumed per usei x emission factor for fuel

where “i” refers to the product type.

For Automobile Manufacturers, the above formula is modified as:
CO2 emissions from use of sold vehicles = ∑ total lifetime expected uses of sold vehicles (kms)i x
number of vehicles sold in reporting period by vehicle type (no.)i x carbon efficiency of the vehicle
type (gCO2/km)I
where carbon efficiency of a given vehicle type is computed as:
= Fuel consumed per km (liters/km) x emission factor for fuel (gCO2/liter)

Because there is less disclosure of data points required to estimate CO2 emissions for heavy
vehicles, in the current dataset the estimates are provided for light vehicles (passenger cars and
light commercial vehicles) only.
For light vehicles, the three factors in the above equation are estimated as follows:

1. Total lifetime expected use of sold vehicles: We assume the life of a light vehicle to be 10
years and per-year use of a light vehicle to be 15,000 km driven. The total lifetime expected
use is thus estimated to be 150,000 kms driven. These values are in line with the lifetime
mileage values used by some automobile manufacturers to estimate and report their Scope
3 downstream emissions (for “use of sold products” category).

2. Number of vehicles sold by vehicle type: We have defined five categories (vehicle types)
under light vehicles. Please refer to Exhibit 7 for more details on the vehicle types and their
definitions. To estimate the number of light vehicles sold by category / vehicle type, we refer
to the company disclosures (annual reports, company website etc.).

9 MSCI, Scope 3 Estimation methodology, April 2023

9 http://www.ghgprotocol.org/sites/default/files/ghgp/standards/Scope3_Calculation_Guidance_0.pdf

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3. Carbon efficiency of the vehicle type: To estimate the carbon efficiency of different vehicle
types, we use the following sources:

a. Company sources: emissions gCO2/km for each type of vehicle; average fleet
emissions etc.

b. Regulatory sources such as the U.S. Environment Protection

Agency (EPA), the European Environment Agency, the Ministry of Industry and
Information Technology of the People’s Republic of China, etc.

c. If no disclosures are available, we estimate the carbon efficiency based on the

country emission standards and the geographic make-up of a company’s
revenue.
To estimate the carbon efficiency of vehicles, we consider only direct / tailpipe emissions.

Exhibit 7: Light vehicle types & definitions

Vehicle type Definition

Passenger Cars excluding multi-utility vehicles, sport-utility

Passenger Car vehicles (SUVs), and cars weighing more than 10,000 pounds
(4,535 kg).

Multi-purpose vehicles, Light Commercial Vehicles, SUVs, Cross

Types, Pickups, with weight of more than 10,000 lbs. (4,535 kg).
MPVs/SUVs/LCVs
If car is considered an MPV/SUV but weighs less than 10,000
pounds classify as "Passenger Car."

Car designed for spirited performance, usually two-seater, two-

Sports Car
door automobile.

Vehicle that is powered by a combustion and electric engine;

there are different types of hybrid vehicles from mild to plugin
Hybrid Vehicles
hybrid. Only vehicles emitting less than 50g carbon emissions
per km are considered under this category.

Vehicle type Definition

Vehicle that is only powered by electric energy/ hydrogen

Zero emission
and therefore emits zero direct emissions; not plug-in
vehicles
electric vehicles

Source: MSCI ESG Research

This dataset is available for Automobile manufacturers in the MSCI ACWI Index coverage universe.

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Please note that MSCI’s Climate Risk Center has introduced a different Scope 3 estimation model11 in
May 2020, which has its own methodology document and a quarterly update cycle.
Factors associated with the legacy Scope 3 estimation model continue to be available on ESG
Manager, but the data is no longer refreshed.

Enterprise Value including cash (EVIC) intensity and financed emissions

use case
Various financial metrics can be used to normalize emissions to compute the greenhouse gas
(GHG) intensity of a company, portfolio or benchmark index. Enterprise value (EV) is defined as the
sum of the market capitalization of common stock and preferred equity at fiscal year-end, and the
book values of total debt and minorities’ interests minus the cash and cash equivalents held by the
company. The enterprise value including cash (EVIC) is an alternate measure to EV, which is defined
as the sum of market capitalization of common stock and preferred equity, and the book values of
total debt and minority interest, at fiscal year-end.
Using EVIC instead of EV for the purpose of GHG emissions intensity calculation increases the MSCI
ACWI IMI coverage universe by 2%, including companies with negative EVs (as of Oct 31, 2020).
EVIC or EV, when used as an allocation base in portfolio footprint calculation, apportions a
company’s emissions to both its debt and equity holders (while the use of market cap as an
allocation base only apportions the company’s emissions to its equity holders).
A Financed Carbon Emission footprint metric can therefore be used in an ownership-based approach
for multi-asset class portfolios. It measures the carbon emissions, for which an investor is
responsible, per USD million invested, by their total overall financing where emissions are
apportioned across all outstanding shares and bonds (% Enterprise Value including cash).
Revenue, a proxy for company output, is a common metric used to normalize carbon emissions of a
company or portfolio.

Carbon emission estimates update cycle

We collect reported scope 1 and 2 GHG emissions data throughout the year on a rolling schedule
(based on company filings or via the CDP), while scope 1 and 2 emission estimates for companies
that do not report emissions are generated semi-annually. This to accomodate differences in fiscal
year cycles across the global universe of issuers.
The first semi-annual assessment is conducted from January to June. For companies where
emission data for the latest fiscal year is not available as of June, we estimate emissions in July. For
example, Scope 1 and Scope 2 GHG emissions data would be collected from January to June 2020,
or for companies in this batch which have not reported data, emissions would be estimated and
made available by end-July 2020, based on available reports as of June 2020.
The remaining companies that report scope 1 and 2 GHG emissions would be assessed by the end
of the year. For these issuers we conduct the second semiannual review of reported data and update
of Scope 1 and 2 emissions data and estimates from July through December. In this example
(Exhibit 8), 2019 scope 1 and 2 GHG emissions data would be collected and made publicly available
from July to December 2020 and emission estimates would be generated in January 2021, based on

11 MSCI, Scope 3 Estimation methodology, April 2023

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available reports as of December 2020. Each company's estimated emissions are calculated using
the appropriate estimation logic (see Appendix 1).

Exhibit 8: Carbon emission estimates update cycle

Source: MSCI ESG Research

EVIC / Emission intensities over EVIC Update Cycle

A companys’ most recent scope 1 and 2 GHG emissions intensity is calculated using the company's
most recently reported or estimated Scope 1 and 2 GHG emissions normalized by the most recently
available Enterprise Value including cash (EVIC) – EVIC is taken at the end of the fiscal year. This
data is updated at the same time the companys’ scope 1 and 2 GHG emissions data is updated
and/or at the time the company updates its EVIC data. If the company does not disclose its scope 1
and 2 GHG emissions, then we generate emission estimates.

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Appendices
Appendix 1: Estimation logic for different cases
As discussed earlier, based on the historical data availability including fuel mix data and extent of
disclosure (full or part), we select the best option to estimate Scope 1 and Scope 2 emissions
separately. We add Scope 1 and Scope 2 emissions to derive Scope1+2 emission value. There could
be some instances when a company reports only Scope 1+2 emissions, in such cases we use one of
three models to estimate Scope 1 and Scope 2 using reported Scope 1+2 value. Exhibit A1.1
contains all such possible cases and our estimation approach for those.

Please refer to footnote12 to understand the different symbols and notations used in this table.

Exhibit A1.1: Estimation logic for different cases

Sr.
Case Key combination
no.
S1 S2 S12 Estimation process
S1 S2 S12
Key Key Key

1 R R R Check if s12 = s1 + s2 R R R
2 R R - Compute s12 = s1+s2 R R R
3 R - R Compute s2 = s12 – s1 R R R
4 - R R Compute s1 = s12 – s2 R R R
5 - - R Estimate s1 using Production model for Prod Prod R
power generating utilities. Then
estimate s2 as s12 - s1.
For other companies, if both E.CSI.s1 CSI CSI R
and E.CSI.s2 are available then
estimate s1 and s2 using Company-
specific intensity model as:
s1 = s12 x E.CSI.s1/(E.CSI.s1 +
E.CSI.s2) &
s2 = s12 x E.CSI.s2/(E.CSI.s1 +
E.CSI.s2)
Else use Industry segment-specific Seg Seg R
intensity model to estimate s1 and s2 mt mt
as:
s1 = s12 x E.Segmt.s1/(E.Segmt.s1 +
E.Segmt.s2) &
s2 = s12 x E.Segmt.s2/(E.Segmt.s1 +

12R = reported, s1 = Scope 1 carbon emissions, s2 = Scope 2 carbon emissions, s12

= Scope 1+2 carbon emissions, E.CSI.s1 = Company-specific carbon intensity (scope 1), E.CSI.s2 = Company-specific
carbon intensity (scope 2), E.Segmt.s1 = Segment carbon intensity (scope 1), E.Segmt.s2 = Segment carbon intensity
(scope 2)

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E.Segmt.s2)

6 R - - If E.CSI.s2 available, then estimate s2 R CSI CSI

based on E.CSI.s2 using Company-
specific intensity model & then estimate
s12 = s1 + s2.

Else use Industry segment-specific R Seg Seg

intensity model to estimate s2 based on mt mt
E.Segmt.s2, & then estimate s12 = s1 +
s2

7 - R - Estimate s1 using Production model for Prod R Pro

power generating utilities. Then d
estimate s12 = s1 + s2.

For other companies, if E.CSI.s1 CSI R CSI

available, then estimate s1 based on
E.CSI.s1 using Company-specific
intensity model & then estimate s12 =
s1 + s2.

Else use Industry segment-specific Seg R Seg

intensity model to estimate s1 based on mt mt
E.Segmt.s1, & then estimate s12 = s1 +
s2

8 - - - Scope 1 Prod - -

Estimate s1 using Production model for

power generating utilities.

Scope 1 CSI - -

For other companies, if E.CSI.s1

available, then estimate s1 based on
E.CSI.s1 using Company-specific
intensity model.

Scope 1 Seg - -
mt
Else use Industry segment-specific
intensity model to estimate s1 based on
E.Segmt.s1.

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Scope 2 - CSI -

If E.CSI.s2 available, then estimate s2

based on E.CSI.s2 using Company-
specific intensity model.

Scope 2 - Seg -
mt
Else use Industry segment-specific
intensity model to estimate s2 based on
E.Segmt.s2.

Scope 1+2 Based on key

Estimate s12 as s1 + s2. combination logic
(refer Appendix 2)

Source: MSCI ESG Research

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Appendix 2: Estimation key combination logic for scope 1+2

KEY Scope 1 Key
Combinations
Reported E.Prod E.CSI E.Seg E.Seg E.Seg E.Seg E.Seg
mtHig mtMode mtMode mtMode mtLo
h rately rate rately w
High
Low

Reported Reported E.prod E.CSI E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
mtHigh mtLow
Moder Moder Moder

ately ate ately

High
Low

E.prod E.prod E.prod E.CSI E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
mtHigh mtLow
Moder Moder Moder

ately ate ately

High
Low

E.CSI E.CSI E.CSI E.CSI E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
mtHigh mtLow
Moder Moder Moder

ately ate ately

High
Low

E.Segmt- E.Seg E.Seg E.Seg E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
mtHigh mtHigh mtHig mtHigh mtLow
High Moder Moder Moder
h
ately ate ately
High
Low

E.SegmtMod E.Seg mt- E.Seg E.Seg E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
erately mt- mt- mt- mtLow
Moder Moder Moder Moder
High Moder Moder Moder
ately High ately ate ately
ately ately ately High
Low
High High High

E.Segmt- E.Seg mt- E.Seg E.Seg E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
mt- mt- mt- mtLow
Moderate Moder Moder Moder Moder
Moder Moder Moder
ate ate ate ately
ate ate ate
Low

E.SegmtMod E.Seg mt- E.Seg E.Seg E.Seg E.Seg mt- E.Seg mt- E.Seg mt- E.Seg
erately mt- mt- mt- mtLow
Moder Moder Moder Moder
Low Moder Moder Moder
ately ately ately ately
ately ately ately
Low Low Low Low
Low Low Low

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E.Segmt- E.Seg E.Seg E.Seg E.Seg E.Seg E.Seg E.Seg E.Seg

Low mtLow mtLow mtLo mtLow mtLow mtLow mtLow mtLow
w

Source: MSCI ESG Research

Please note that this key combination logic is applicable when Scope 1+2 carbon emissions are not
disclosed. For other cases, please refer to Appendix 1.

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Appendix 3: Historical methodology changes

A3.1 Enhancement of industry specific intensity model (January 2017)

In January 2017, we enhanced the ‘Industry specific intensity model’ approach of our carbon
emissions estimation model for the FY2015 Carbon Emission Data (scope 1 and 2) to allow for more
nuances for companies estimates within a subindustry but with different segment activities.
Industry specific intensity model – this approach is used for companies with no reported historical
data. Previously (from 2008-2014) our approach was to estimate carbon emissions intensity for
each of 157 GICS®13 sub-industries using company-specific carbon emission intensities of
companies in a given GICS sub-industry and then apply revenue of the year to come up with the
estimation. Following was the process to generate estimates based on previous GICS Sub-industry
based approach:

i. From the reported data set of the last five years, calculate the company-specific carbon
intensities of the companies with reported data.

ii. Within each GICS sub-industry, remove the companies which have intensities below the 10th
percentile or above the 90th percentile (outliers) (Exhibit A3.1, column 1-3).

iii. After removing the outliers, for each GICS sub-industry calculate industry specific carbon
intensity as the average of company-specific carbon intensities within a particular GICS Sub-
Industry (Exhibit A3.1, row 11).

iv. In the next step, apply revenue of the year with missing carbon emission data to industry
specific carbon emissions intensity to estimate the carbon emissions for that year (Exhibit
A3.1, row 12 and 13).

Exhibit A3.1: Estimating carbon emissions using GICS sub-industry based Industry specific
intensity model
S. Name of Company specific Exclude/Keep (remove Intensities
No company carbon intensity (tons outliers falling in top and after
/ mil. USD) bottom decile) removing
outliers
1 Company A 26.5 Keep 26.5
2 Company B 23.2 Keep 23.2
3 Company C 31.6 Keep 31.6
4 Company D 8.6 Exclude -
5 Company E 185.8 Exclude -
6 Company F 35.2 Keep 35.2
7 Company G 27.8 Keep 27.8
8 Company H 26.7 Keep 26.7
9 Company I 29.9 Keep 29.9
10 Company J 30.4 Keep 30.4

13GICS, the global industry classification standard developed by MSCI Inc. and S&P Global. GICS is a service mark of MSCI Inc and
S&P Global.

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11 Industry carbon intensity (tons / mil. USD) at GICS SI level 28.9

12 Revenue of company Z with no disclosed carbon data (million 1,659.2
USD)
13 Estimated carbon emissions (tons) for company Z 47,951
Source: MSCI ESG Research
Starting with FY2015 estimations, we now identify revenue from each of a company’s industry
segments, estimate average carbon emissions intensity for each of the industry segments
(approximately 1000 industry segments) and then apply segment revenue of the year to come up
with the estimation. Please refer to the section on industry segment-specific intensity model to
understand the enhanced approach (from page 8). Please note that we have not restated past
emission estimates (20082014) using industry segment intensities.
As a result of this more granular estimation approach implemented in January 2017, the largest
changes from FY2014 to FY2015 estimations are seen for companies within GICS sub-industries
such as Trading Companies & Distributors, Packaged Foods & Meat, Coal and Consumable Fuels, Oil
& Gas Storage & Transportation, Human Resource & Employment Services among others.
A3.2 Introduction of a new Scope 3 Estimation model (May 2020)
In May 2020 MSCI Climate Risk Center has introduced a new Scope 3 estimation model available
across all sectors. The new estimates are provided for each of the 15 categories defined by the
Greenhouse Gas Protocol (GHGP), aggregated across Scope 3 Upstream, Scope 3 Downstream and
Scope 3 Total, including both emissions and intensities.
As of June 2021, factors associated with the legacy Scope 3 estimation model continue to be
available on ESG Manager, but the data is no longer refreshed.

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Appendix 4: Reported vs. estimated data in MSCI World

Exhibit A4.1: By % of number of companies (as of 31st March 2023)

Exhibit A4.2: By % of total emissions of constituent companies (as of 31st March 2023)

Exhibit A4.3: By constituents’ weight in MSCI World (as of 31st March 2023)

Source: MSCI ESG Research

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Appendix 5: Reported vs. estimated data in MSCI EM

Exhibit A5.1: By % of number of companies (as of 31st March 2023)

Exhibit A5.2: By % of total emissions of constituent companies (as of 31st March 2023)

Exhibit A5.3: By constituents’ weight in MSCI EM (as of 31st March 2023)

Source: MSCI ESG Research

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Appendix 6: Reported vs. estimated data in MSCI ACWI

Exhibit A6.1: By % of number of companies (as of 31st March 2023)

Exhibit A6.2: By % of total emissions of constituent companies (as of 31st March 2023)

Exhibit A6.3: By constituents’ weight in MSCI ACWI (as of 31st March 2023)

Source: MSCI ESG Research

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Appendix 7: Reported vs. estimated data in MSCI ACWI Investable Market Index (IMI)

Exhibit A7.1: By % of number of companies (as of 31st March 2023)

Exhibit A7.2: By % of total emissions of constituent companies (as of 31st March 2023)

Exhibit A7.3: By constituents’ weight in MSCI ACWI IMI (as of 31st March 2023)

Source: MSCI ESG Research

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Appendix 8: Reported vs. estimated data in MSCI BBG Barclays Global Agg Corporate

Exhibit A8.1: By % of number of companies (as of 31st March 2023)

Exhibit A8.2: By % of total emissions of constituent companies (as of 31st March 2023)

Exhibit A8.3: By constituents’ weight in MSCI BBG Barclays Global Agg Corporate (as of 31st

March 2023)

Source: MSCI ESG Research

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