MSCI Inc. (NYSE:MSCI) Q2 2020 Earnings Conference Call - Final Transcript

Jul 28, 2020 • 11:00 am ET

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MSCI Inc. (NYSE:MSCI) Q2 2020 Earnings Conference Call - Final Transcript

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Executive
Henry A. Fernandez

growth of 6.2%, strong adjusted EBITDA growth of 11.8%, reflecting our ability to tightly manage expenses; and strong adjusted earnings per share growth of nearly 15%.

As you are aware, and we have discussed in these calls, we have a number of strategic initiatives underway at MSCI. First, we are expanding our coverage of asset classes to include areas in fixed income and private assets. Second, we are creating new products that can apply to a specific asset class or across multiple asset classes. These new products include content in ESG, climate change, factors, risk models, thematics and futures and options, just to name a few.

Third, we are broadening our reach to newer client segments like wealth managers, insurance companies and corporates. And fourth, we are transforming our technological capabilities, not only to benefit our clients but also to enable our employees to operate even more effectively in the virtual world we're living in. We have made significant investments in these initiatives, and I'm very pleased to report that these investments are yielding strong results.

During our call this morning, I would like to highlight three areas. First, in ESG and climate change, we have continued to expand our content, including research on key topics, additional ratings coverage and new indices in both equity and fixed income and risk models that integrate ESG and climate change variables. These investments in ESG and climate solutions are providing significant returns.

In the second quarter, our ESG franchise across the whole company performed very strongly, reaching a run rate of $174 million. ESG research itself reported its highest ever quarterly subscription sales. And in ESG Indices, AUM in equity ESG and climate change ETFs linked to our indices almost doubled year-over-year, reaching $55 billion at the end of the quarter. We are encouraged by investors' increasing adoption of our tools to effectively integrate ESG and climate change criteria as a core component of building resilient portfolios.

And we believe our ESG solutions have the additional benefit of driving transparency and creating standards for many market participants. As you know all too well, we have long believed sustainable investing is a critical part of the long-term investment process. Our early moves in this area have given us substantial leadership and competitive advantage, which we will continue to capitalize.

A second area I would like to highlight is index futures and options. We are helping our clients build the various elements of an MSCI ecosystem of financial products with deep liquidity on a wide range of market exposures. This ecosystem includes ETFs, listed futures and options, OTC swaps and options and structured products, all fitting and benefiting from one another. Recently, and as part of this important initiative, we significantly expanded our relationship with Hong Kong Exchanges and Clearing, further aligning MSCI with a global exchange leader in the Asia time zone and enabling deeper and more liquid markets for MSCI-linked futures and options. We believe Hong Kong provides access to and the benefits