Anfang
Operational resilience and supply chain risk
This piece summarizes our engagement with a leading multinationalbeverage corporation we hold — including a site visit to the company’slargest franchise bottler’s Jundiaí facility in São Paulo, as well asfollow-up discussions with the beverage company’s sustainabilityteam — to assess how potentially financially material operational riskssuch as water availability, packaging, and climate resilience are beingmanaged following the company’s December 2024 revision of severalsustainability targets.
Physical climate risks: terroir-dependentrisks and opportunities
Physical climate risks — such as shifting temperature patterns, waterscarcity, and soil degradation — are emerging as potentially financiallymaterial considerations for global beverage producers. These risksare particularly pronounced for companies whose products dependon specific growing conditions, or terroir, where subtle environmentalchanges can affect quality, yields, and brand integrity. Whileregulatory and transition risks often dominate climate discussions, inthis piece we cover our engagements with two alcoholic beveragecompanies, which focused on how physical climate impacts couldmanifest across time horizons and how the companies are positioningthemselves to mitigate these effects.
Cybersecurity: bending, not breaking
Given the increasing risk and relevance of cybersecurity for companieswithin our portfolios, and the potentially financially material consequencesof a cyberattack, we conducted a thematic engagement programme tobetter understand how companies are managing the risk. Including a casestudy of a company demonstrating mature cyber governance, this piececovers eight key takeaways from the thematic engagement programme.
Supply chain resilience in the semiconductor sector
The semiconductor value chain remains one of the world’s most complex andglobally interdependent manufacturing ecosystems. Recent geopolitical tensions,export controls, energy constraints, and post-pandemic logistics shocks havereinforced the need for robust, regionally diversified, and technologically resilientsupply chains. Against this backdrop, we engaged with three semiconductorcompanies we hold in our portfolios to assess how leading companies are navigatingthese pressures. In this piece we look at how their strategies highlight a spectrumof approaches, from parallel production capacity and multi-sourcing to strategicpartnerships, regional clustering, and selective technological substitution.
Responsible AI: transparency, governanceand business-model resilience
Artificial intelligence (AI) is reshaping business models across sectors, from HealthCare and Financial Services to digital content and entertainment. While AI may bringmeaningful opportunities to improve efficiency, product innovation and customerexperience, it also raises questions around transparency, data governance, regulatorycompliance and long-term value protection, all of which could pose potentially financiallymaterial risks to companies. In this piece we outline our engagements with companies,which illustrate how responsible AI considerations vary across sectors - and why robustoversight, disclosure and long-term planning are becoming increasingly important.
Product safety in personal care
Given rising consumer scrutiny of cosmetic ingredients and a litigious U.S.environment, in 2025 we held multiple engagements with a multinational personalcare company we own, meeting with Investor Relations team, Chief SustainabilityOfficer, and CEO to discuss product safety, ingredient innovation, and transparency.The company continues to face product safety litigation in the U.S. and broaderquestions from consumers and NGOs around ingredient safety, which we believemay pose a potentially financially material risk. In this piece we look at how thecompany is managing these risks.
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Risk Considerations
There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market value of securities owned by the portfolio will decline. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this strategy. Please be aware that this strategy may be subject to certain additional risks. Changes in the worldwide economy, consumer spending, competition, demographics and consumer preferences, government regulation and economic conditions may adversely affect global franchise companies and may negatively impact the strategy to a greater extent than if the strategy’s assets were invested in a wider variety of companies. In general, equity securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. Stocks of small- and mid-capitalisation companies carry special risks, such as limited product lines, markets and financial resources, and greater market volatility than securities of larger, more established companies. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed markets. Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks. Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility. ESG strategies that incorporate impact investing and/or Environmental, Social and Governance (ESG) factors could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. As a result, there is no assurance ESG strategies could result in more favorable investment performance.
IMPORTANT INFORMATION
The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively the Firm”), and may not be reflected in all the strategies and products that the Firm offers.
This material is for the benefit of persons whom the Firm reasonably believes it is permitted to communicate to and should not be forwarded to any other person without the consent of the Firm. It is not addressed to any other person and may not be used by them for any purpose whatsoever. It expresses no views as to the suitability of the investments described herein to the individual circumstances of any recipient or otherwise. It is the responsibility of every person reading this material to fully observe the laws of any relevant country, including obtaining any governmental or other consent which may be required or observing any other formality which needs to be observed in that country.
This material is a general communication, which is not impartial, is for informational and educational purposes only, not a recommendation to purchase or sell specific securities, or to adopt any particular investment strategy. Information does not address financial objectives, situation or specific needs of individual investors.
Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal.
Prior to making any investment decision, investors should carefully review the strategy’s relevant offering document. For the complete content and important disclosures, refer to the Article’s PDF.
