The MSCI World is also available in green variants some are even more profitable than the original

The MSCI World index, a widely recognized benchmark for global equity markets, has long been a go-to investment option for many investors seeking exposure to large-cap stocks across developed markets. However, as concerns over climate change and corporate responsibility grow, alternative versions of this index have emerged—variants that exclude companies engaged in activities deemed harmful to the environment or society. These so-called “green” indices offer investors the opportunity to align their portfolios with ethical or environmental values without necessarily sacrificing returns.

In recent years, several sustainable variations of the MSCI World have been introduced, each applying different criteria to filter out certain sectors. The most basic version is the MSCI World ESG Screened Index, which excludes companies involved in specific industries such as weapons manufacturing or tobacco production. This exclusion process removes more than 100 companies from the parent index, leaving behind 1,197 firms. According to data from the index provider, since 2013, the ESG Screened Index has delivered an average annual return of 13.8 percent for investors based in the Eurozone, slightly outperforming the standard MSCI World index, which averaged around 13.3 percent during the same period.

Moving up the sustainability ladder, the MSCI World ESG Enhanced Focus Index applies stricter ESG criteria. Companies within this index are weighted according to their ESG scores, meaning those with higher sustainability performance receive greater representation. This approach aims to reduce the carbon footprint of the portfolio by approximately 30 percent compared to the traditional MSCI World. Despite these enhancements, fossil fuel industries remain included, albeit with lower weightings. Since 2013, the ESG Enhanced Focus Index has achieved an average annual return of about 13.2 percent, slightly lagging behind its parent index but still maintaining strong performance.

Further along the spectrum of sustainability, the MSCI World Selection Index—previously known as the ESG Leaders—applies even more stringent selection criteria. This index focuses on companies that demonstrate leadership in environmental, social, and governance practices. It excludes not only obvious offenders like arms manufacturers and tobacco producers but also companies whose business models are considered incompatible with long-term sustainability goals. As a result, the number of companies in this index is significantly smaller than in the other variants. While precise performance figures were not fully detailed in available reports, the index is designed to reflect a more concentrated and focused portfolio aimed at maximizing both ethical alignment and financial returns.

These green alternatives to the MSCI World are increasingly being considered by investors who wish to avoid supporting industries they find ethically objectionable. For instance, individuals concerned about the impact of fossil fuels on climate change might opt for the ESG Screened or Enhanced Focus indexes, while those with stronger ethical convictions could choose the Selection Index. Each variant offers a different balance between exclusions and potential returns, allowing investors to tailor their choices based on personal priorities.

The emergence of these sustainable indices reflects broader trends in finance, where environmental and social considerations are becoming integral components of investment strategies. With the ongoing debate surrounding climate change and corporate accountability, the demand for such products is likely to continue growing. Investors now have multiple options when considering how to allocate capital in a way that aligns with their values while still aiming for competitive returns.