How should MSCI balance increasing the granularity of ESG ratings versus maintaining ease of use for its ESG Ratings product?

Introduction

The trade-off between increasing the granularity of ESG ratings and maintaining ease of use for MSCI's ESG Ratings product presents a significant challenge. This scenario involves balancing the depth of environmental, social, and governance insights with user-friendly accessibility. I'll address this by examining the product context, identifying key metrics, designing experiments, and providing a strategic recommendation.

Step 1

Clarifying Questions (3 minutes)

• Based on the current market trends, I'm thinking ESG ratings are becoming increasingly important for investors. Could you share how the demand for our ESG Ratings product has changed over the past year?

Why it matters: Helps gauge market appetite for more detailed ratings Expected answer: Significant increase in demand Impact on approach: Would justify investing in increased granularity

• Considering our user base, I'm assuming we serve a mix of sophisticated institutional investors and smaller retail investors. Can you confirm our primary user segments and their relative importance?

Why it matters: Different user segments may have varying needs for granularity vs. simplicity Expected answer: Primarily institutional investors, growing retail segment Impact on approach: May need to consider tiered product offerings

• From a technical standpoint, I'm curious about our data infrastructure. How scalable is our current system for handling increased data points and more complex calculations?

Why it matters: Determines feasibility of increasing granularity Expected answer: Robust system with some room for expansion Impact on approach: Might influence the pace and extent of granularity increase

• Regarding our competitive landscape, I'm thinking other ESG rating providers might be moving towards more granular ratings. How do our current offerings compare to our main competitors?

Why it matters: Helps position our product strategy in the market Expected answer: We're on par, but some competitors are becoming more granular Impact on approach: May accelerate our timeline for increasing granularity

• Considering resource allocation, I'm wondering about our current team capacity. Do we have the necessary expertise and bandwidth to develop and maintain more granular ratings?

Why it matters: Determines our ability to execute on increased granularity Expected answer: Some capacity, but may need additional resources Impact on approach: Might influence the phasing of any granularity increases