Insight Article Desktop Banner
Global Equity Observer
June 22, 2021

Low Carbon Ambition

Insight Video Mobile Banner
June 22, 2021

Low Carbon Ambition

Global Equity Observer

Low Carbon Ambition

Share Icon

June 22, 2021


Earth Day on April 22nd, with its theme of restoration, gave rise to a collection of new environmental pledges on the global stage.


President Biden, seeking to reclaim global leadership in the fight against global warming, unveiled the U.S. goal of cutting emissions 50% from 2005 levels by 2030. Prime Minister Yoshihide Suga raised Japan's target for cutting emissions to 46% by 2030, up from 26%, while Prime Minster Justin Trudeau raised Canada’s goal to a cut of 40-45% by 2030 below 2005 levels, up from 30%. The recently agreed European Union (EU) Climate Law aims to reduce EU carbon emissions by at least 55% by 2030 compared with 1990 levels. Biden’s move followed President Xi Jinping’s emissions goal set last September with China seeking to achieve net zero emissions by 2060. There is hope that this will spur the next biggest emitters, India and Russia, towards improved pledges at COP26, the United Nations (UN) Climate Change Conference in November this year. Closer to home, Morgan Stanley has pledged1 to mobilise $1 trillion in sustainable solutions globally that include helping prevent and mitigate climate change.

Companies’ Scope 1 and 2 emissions are just first steps towards solving climate change

Within our team’s portfolios, our companies have been busy too, encouraging consumers—their customers—to live more sustainably. There is growing recognition that companies’ Scope 1 (direct or controlled) emissions and Scope 2 emissions (indirect emissions from purchase of energy) are just first steps towards solving climate change. Greater focus on Scope 3 (everything beyond 1 and 2, including energy customers consume when using a product) has begun to work its way not only into the consciousness of CEOs but also their advertising campaigns. Household companies see a revenue opportunity in identifying for consumers which small changes at home can make big changes for the planet. Consulting firms argue that the pandemic has intensified interest in “conscious consumption”. A U.S. multinational consumer goods corporation estimates that avoided emissions from low-energy laundry cycles since 2015 equals 15 million tons of CO2 or the equivalent of 3 million cars off the road. For context, in 2020 this company’s scope 1 and 2 emissions were 2.6 million tons.

Personal care companies now offer comprehensive sustainability programmes. Looking to accelerate already steady progress in its carbon footprint, the world's largest cosmetics company aims to reduce its carbon footprint by 50%, ensure 95% of its ingredients are from circular sourcing and invest €100 million in regenerating ecosystems. A German chemical and consumer goods company has launched a carbon footprint calculator to help consumers understand their personal CO2 footprint and contribute to sustainability through personal lifestyle choices. The scale of the Scope 3 challenge suggests there is work to do. It aims to save its consumers, customers and suppliers 100 million tons of CO2 cumulatively between 2016 and 2025. To date it has saved 50 million tons. Its 2020 Scope 1 and 2 emissions were 0.535 million tons.

The scale of the Scope 3 challenge suggests there is work to do

One of the world’s largest software companies takes the prize for ambition, pledging to go carbon negative by 2030 and to remove, by 2050, the entire historical carbon emissions of the company since it was founded in 1975. A global payments company has announced its commitment to reach net zero by 2040 and celebrated carbon neutrality achieved in its operations in 2020. This company signing up to the Climate Pledge and Climate Business Network offers further examples of companies recognising the importance of not only solving but also being seen to be part of the global solution to climate change.

Earth Day’s announcements indicated an extension of consultants and IT companies seeking solutions to empower companies to decarbonise their supply chain

Some companies, including a leading software and business solutions company, are seeking to spearhead the move towards a circular economy and a low carbon future with technology facilitating responsible design, sourcing, production, consumption, recovery and reuse. Consultants, already embedded in companies around the world, will play a key role in enabling other companies in the low carbon and energy transition. One consultant predicts (in “The Green Behind the Cloud”) that migrations to the public cloud can reduce global carbon emissions by as much as 59 million tons of C02 annually. Earth Day’s announcements indicated an extension of consultants and IT companies seeking to co-innovate and co-develop solutions for responsible production and design, empowering companies to decarbonise their supply chain and capture share in the circular economy. This follows similar consultant and IT company alliances of last year, joining with the UN Global Compact, to launch Sustainable Development Goals (SDG) Ambition Guidance, an SDG achievement accelerator.

We in the International Equity Team applaud these ambitions and actions, while recognising the challenges of achieving them, and we thought it would be helpful to articulate some of the steps we are taking in our team to accelerate positive change.

1.      We recently enhanced the suitability criteria for our Global Sustain strategy. The Portfolio will seek to achieve attractive returns with significantly lower carbon emissions than the universe. We are working with our clients to join us in this objective where they see fit.

2.      In order to achieve this objective for our Global Sustain strategy, we have introduced an explicit carbon screen to identify and filter out the highest carbon emitters in the universe.

3.      Finally, we have introduced and have been executing for some months on a systematic engagement programme to question the companies we own on their sustainability initiatives, and how they intend to meet the goals they are setting.  

Clients of our other strategies also benefit from this additional engagement with our investee companies given meaningful overlap in holdings across our strategies. Such conversations also offer insights to management quality, corporate agility and capital allocation in the face of new risks.

ESG integration today requires a facility not only with price and quality but with the third dimension of sustainability. We are conscious that there is always more to learn, but we believe our access and experience do give us an advantage in encouraging company managements towards a low carbon future. In this, as in everything we do, we remain ambitious.


1 See:

To reach the $1 trillion target, MS will work with corporations, governments and individuals to provide clean tech and renewable energy finance, green bonds and other transactions.


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.

Head of International Equity Team
International Equity Team
COO and Head of Client Experience, International Equity
Featured Funds


Free cash flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able generate after laying out the money required to maintain or expand its asset base. Return On Operating Capital Employed (ROOCE) is a ratio indicating the efficiency and profitability of a company’s trade working capital. Calculated as: earnings before interest and taxes/property, plant and equipment plus trade working capital (ex-financials and excluding goodwill).



There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

A separately managed account may not be appropriate for all investors. Separate accounts managed according to the particular Strategy may include securities that may not necessarily track the performance of a particular index. A minimum asset level is required.

For important information about the investment managers, please refer to Form ADV Part 2.
The views and opinions and/or analysis expressed are those of the author or the investment team as of the date of preparation of this material and are subject to change at any time without notice due to market or economic conditions and may not necessarily come to pass.

Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. 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 has been prepared on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and the Firm has not sought to independently verify information taken from public and third-party sources.

This material is a general communication, which is not impartial and all information provided has been prepared solely for informational and educational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

Charts and graphs provided herein are for illustrative purposes only. Past performance is no guarantee of future results.

The representative account has employed the investment strategy in a similar manner to that employed in the team’s separately managed accounts (“SMAs”) and other investment vehicles, i.e., they were generally operated in a consistent manner. However, portfolio management decisions made for such representative account may differ (i.e., with respect to liquidity or diversification) from the decisions the portfolio management team would make for SMAs and other investment vehicles. In addition, the holdings and portfolio activity in the representative account may not be representative of some SMAs managed under this strategy due to differing investment guidelines or client restrictions.

The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

This material is not a product of Morgan Stanley’s Research Department and should not be regarded as a research material or a recommendation.

The Firm has not authorised financial intermediaries to use and to distribute this material, unless such use and distribution is made in accordance with applicable law and regulation. Additionally, financial intermediaries are required to satisfy themselves that the information in this material is appropriate for any person to whom they provide this material in view of that person’s circumstances and purpose. The Firm shall not be liable for, and accepts no liability for, the use or misuse of this material by any such financial intermediary.
This material may be translated into other languages. Where such a translation is made this English version remains definitive. If there are any discrepancies between the English version and any version of this material in another language, the English version shall prevail.

The whole or any part of this material may not be directly or indirectly reproduced, copied, modified, used to create a derivative work, performed, displayed, published, posted, licensed, framed, distributed or transmitted or any of its contents disclosed to third parties without the Firm’s express written consent. This material may not be linked to unless such hyperlink is for personal and non-commercial use. All information contained herein is proprietary and is protected under copyright and other applicable law.

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.



This material is only intended for and will only be distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each other’s products and services. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. MSIM’s affiliates are: Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd, Calvert Research and Management, Eaton Vance Management, Parametric Portfolio Associates LLC, Atlanta Capital Management LLC, Eaton Vance Management International (Asia) Pte. Ltd.

This material has been issued by any one or more of the following entities:

This material is for Professional Clients/Accredited Investors only.

In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (“FMIL”). FMIL is regulated by the Central Bank of Ireland and is incorporated in Ireland as a private company limited by shares with company registration number 616661 and has its registered address at The Observatory, 7-11 Sir John Rogerson’s Quay, Dublin 2, D02 VC42, Ireland.

Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 1981121. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA.

In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorised and regulated by the Eidgenössische Finanzmarktaufsicht (“FINMA”). Registered Office: Beethovenstrasse 33, 8002 Zurich, Switzerland.

Outside the US and EU, Eaton Vance materials are issued by Eaton Vance Management (International) Limited (“EVMI”) 125 Old Broad Street, London, EC2N 1AR, UK, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority.

Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. The Netherlands: MSIM FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein 1 1096HA, Netherlands. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. Germany: MSIM FMIL (Frankfurt Branch), Niederlassung Deutschland, Grosse Gallusstrasse 18, 60312 Frankfurt am Main, Germany (Gattung: Zweigniederlassung (FDI) gem. § 53b KWG).

MSIM Ltd (Representative Office, Unit Precinct 3-7th Floor-Unit 701 and 702, Level 7, Gate Precinct Building 3, Dubai International Financial Centre, Dubai, 506501, United Arab Emirates. Telephone: +97 (0)14 709 7158).

EVMI utilises a third-party organisation in the Middle East, Wise Capital (Middle East) Limited (“Wise Capital”), to promote the investment capabilities of Eaton Vance to institutional investors. For these services, Wise Capital is paid a fee based upon the assets that Eaton Vance provides investment advice to following these introductions.

A separately managed account may not be appropriate for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment managers, please refer to Form ADV Part 2.

Please consider the investment objectives, risks, charges and expenses of the funds carefully before investing. The prospectuses contain this and other information about the funds. To obtain a prospectus for the Morgan Stanley funds please download one at or call 1-800-548-7786 Please read the prospectus carefully before investing.

Morgan Stanley Distribution, Inc. serves as the distributor for Morgan Stanley Funds.



This is a Marketing Communication.

It is important that users read the Terms of Use before proceeding as it explains certain legal and regulatory restrictions applicable to the dissemination of information pertaining to Morgan Stanley Investment Management's investment products.

The services described on this website may not be available in all jurisdictions or to all persons. For further details, please see our Terms of Use.

Privacy & Cookies    •    Terms of Use

©  Morgan Stanley. All rights reserved.