MSCI (MSCI) Barclays 22nd Annual Global Financial Services Conference 2024 summary

Business performance and operating trends

• First quarter saw elevated cancellations, mainly due to a $7 million impact from a large global bank merger and hedge fund restructurings, with most cancels concentrated in Index, ESG, and Analytics segments.

• Second quarter retention rates rebounded, with robust sales and retention north of 95% in Index and Analytics.

• Elevated cancellations are expected in the third quarter, driven by ongoing industry pressures, but retention rates are projected to recover in the fourth quarter to levels similar to late 2023.

• Underlying secular growth drivers remain strong, with client engagement and expansion opportunities persisting despite longer sales cycles.

• Cyclical, not structural, pressures are impacting results, with recovery timing dependent on sustained equity market momentum.

ESG and Climate segment outlook

• ESG and Climate revenue run rate is about $545 million, with $68 million from Climate subscriptions growing at roughly 30%.

• Long-term ESG growth targets remain in the mid to high twenties, supported by early-stage adoption, regulatory drivers, and expansion into new asset classes and geographies.

• Climate is expected to become a larger opportunity than non-Climate ESG due to broader applicability across financial services, especially insurance and banking.

• Competitive differentiation is based on investment process integration and comprehensive solutions for performance and risk management.

• M&A remains disciplined, focused on unique data sets and strategic fit, with recent acquisitions like Trove enhancing climate data capabilities.

Geographic and partnership expansion

• EMEA accounts for 50% of ESG and Climate run rate, Americas mid-30%, and APAC is the fastest-growing region at around 20%.

• ESG adoption and growth rates are robust outside North America, with APAC markets earlier in the adoption curve.

• Partnership with Moody’s replaces Moody’s proprietary ESG content with MSCI’s, expanding reach into credit investors, banks, and insurance, and leveraging Moody’s Orbis database for broader private company ESG coverage.

• The Moody’s partnership provided a significant one-time boost to recurring sales in the second quarter.