Sustainable Investing

Our Philosophy

MSIM’s sustainable investing philosophy is anchored on the belief that there are a spectrum of approaches to utilizing material environmental, social and governance (ESG) information and criteria to deliver strong returns for clients. We are committed to ESG-informed investment decision making and we seek to leverage our influence to drive better investment performance alongside improved sustainability practices and outcomes through thoughtful, value-added investee engagement. MSIM offers a variety of sustainable investing options, from funds that integrate ESG factors as an intrinsic part of the investment process, to thematic Sustainable Funds that seek to achieve attractive financial returns alongside positive impact.

SUSTAINABILITY FOCUS AREAS

MSIM has identified four focus areas that are of strategic importance to our thematic research and company engagement/asset stewardship work that are both potentially material to our investment goals and vitally important from a systemic perspective. These themes touch all of our investment teams to greater and lesser degrees depending on asset class, geography, and investment style and strategy.

DECARBONIZATION &
CLIMATE RISK

Supporting the transition to a low carbon economy and net zero alignment

CIRCULAR ECONOMY &
WASTE REDUCTION

Supporting business models that reduce impact on natural resources and that reduce waste generation

DIVERSE & INCLUSIVE
BUSINESS

Supporting businesses and business practices that create a more just, equitable and inclusive society

DECENT WORK &
RESILIENT JOBS

Supporting decent work across the entire value chain and helping to create resilient workforces in the face of innovation and change

HIGHLIGHTS

Our PRI** Score

A+

in Strategy & Governance; Listed Equity Incorporation and Active Ownership; Corporate Fixed Income; and Securitized Fixed Income

A+

in Property, Infrastructure, and Sovereign Fixed Income

GRESB Score

Green Star recognition for Core and Value-add/Opportunistic Real Estate funds

2020 Proxy Voting Stats

5,919

meetings voted

23%

votes against say on pay proposals

9%

votes against management

61%

support for climate-related proposals overall

Engagement

700+

sustainability-related engagements with company management or boards in 2020

OUR SUSTAINABLE INVESTING FRAMEWORK

Leadership in Sustainability

Investment Management Sustainability Council

MSIM's Sustainability Council comprises senior, cross-functional business leaders and investment leaders who oversee and guide MSIM's support for the sustainable investment strategies of each business, including: promoting definitions and frameworks for Sustainable Investing; supporting the continued innovation of ESG products and solutions; championing Sustainable Investing across MSIM's staff and culture; and ensuring business readiness for evolving client/regulator demands.

Investment Management Sustainability Team

The Sustainability Team is responsible for developing MSIM's ESG investment integration standards, helping to launch thematic Sustainable Funds, advising clients on sustainability matters, and producing sustainability data, tools and research in support of our investment teams. The Sustainability Team also comprises the Global Stewardship function, which coordinates our stewardship and investee engagement agenda.

Sustainable Investing Team Leads

Our portfolio management teams are ultimately responsible for evaluating the ESG risks and opportunities of each investment decision or asset, and of the portfolio as a whole. In doing so, they leverage ESG information and insights in a way that is aligned with their existing investment philosophy and strategy. Our largest teams or asset class platforms have appointed at least one dedicated ESG research specialist to lead this work for the relevant group.

Morgan Stanley Institute1 for Sustainable Investing

The Institute is dedicated to accelerating the adoption of sustainable investing by partnering across the firm to foster innovation, help develop the next generation of sustainable investing leaders and generate insights that inform and empower investors.

Capabilities

MSIM offers a range of customized and dedicated sustainable investing capabilities spanning multi-asset and private markets. For example, for customized multi-asset portfolios, we may customize a basket of securities or funds according to the particular sustainability preferences of the client. On the private markets side, we offer thematic impact investing opportunities across a range of focus areas, including climate and social impact.

Insights

View all Sustainable Insights

Questions & Answers

ESG (environmental, social and governance), SRI (socially responsible investing) and sustainable investing are all different terms used to describe the general concept of the use of sustainability factors or information to either define or inform investment decision making. Historically ‘SRI’ has been used to describe a values and ethics based approach to investing, typically focused on exclusionary screens. The acronym ‘ESG’ later emerged around the same time as the launch of the Principles for Responsible Investment, as a shorthand way to refer to the universe of environmental, social and corporate governance issues faced by companies that are not easily captured in traditional financial statements. As the field has grown, and more financially oriented ways of using sustainability information in investing have developed along with the proliferation of ESG data, we find that these terms are often used interchangeably. MSIM prefers the term sustainable investing as we believe this is emerging as a catch-all term for the range of approaches deployed across the investment industry today. The graphic above, ‘Our Sustainable Investing Framework’, best describes how we view and implement the spectrum of approaches across our investment vehicles or products.

We believe that material ESG factors are an important driver of long-term financial returns from both an opportunity and risk mitigation perspective and have developed an internal framework to implement sustainable investing. In 2019, Morgan Stanley’s Institute for Sustainable Investing conducted a study of the performance of nearly 11,000 mutual funds between 2004 and 2018 and found that there was no financial trade-off in the returns of sustainable funds compared to traditional funds and that sustainable funds demonstrate lower downside risk. In 2020, the Institute released an update to this study, which found that sustainable equity and taxable bond funds outperformed traditional peers during the 2019 market boom and weathered the unprecedented global shock triggered by the COVID-19 pandemic in the first half of 2020 better than traditional funds. Specifically, U.S.-based sustainable equity funds outperformed their traditional peers by a median of 2.8% in 2019 and 3.9% in the first half of 2020. Sustainable taxable bond funds outperformed traditional peers by a median of 0.8% in 2019 and 2.3% in the first half of 2020.

The performance is provided for illustrative purposes only and is not meant to depict the performance of a specific investment. Past performance is no guarantee of future results.

We believe that macro sustainability trends, such as climate change, pollution and waste and human capital development, pose a growing set of risks and opportunities to all investors and that leveraging ESG information can assist to better identify the materiality of those risks and opportunities. While the macro trends are universal and often science-based, their implementation in investing needs to be done thoughtfully as the materiality of these factors will depend on asset class, investment strategy, geography, industry and time horizon. Accordingly, our investors adopt a bottom-up approach to ESG integration, actively seeking to identify the most material sustainability risks and opportunities relevant to their investment universe, and incorporating those considerations into buy/sell decisions, portoflio construction, and ongoing investment monitoring.

As described in our Sustainable Investing Framework above, MSIM’s Sustainable Objective and Impact funds seek to achieve positive social and/or environmental objectives alongside a market-rate financial return. Currently our Sustainable Objective and Impact solutions are managed by MSIM’s Alternative Investment Partner’s (AIP) Impact platform, which offers impact investing solutions focused on high impact geographies, populations and themes like climate solutions.

In addition to dedicated impact investing solutions many of our Sustainable Core funds have adopted or are moving towards adoption of net zero emissions targets in line with the 1.5°C goal of economic decarbonization by 2050. By investing in net zero aligned funds, investors have the opportunity to contribute to positive impact by supporting the transition to a low carbon economy.

Have another question for us? Please email sustainability_msim@morganstanley.com

Our Partnerships

Emily Chew
Global Head of Sustainability
10 years industry experience
Rui De Figueiredo
Co-Head and CIO of the Solutions & Multi-Asset Group
24 years industry experience
Ted Eliopoulos
Vice Chairman and Head of Strategic Partnerships
24 years industry experience
Navindu Katugampola
Managing Director
16 years industry experience
Vikram Raju
Head of Impact Investing
25 years industry experience
Mona Yaghmaie-Benisi
Executive Director
12 years industry experience
Vladimir Demine
Head of ESG Research
19 years industry experience
Drew Hambly
Executive Director
24 years industry experience
Thomas Kamei
Executive Director
9 years industry experience
Li Zhang
Executive Director
13 years industry experience
Jessica Whitt
Vice President
16 years industry experience

Headline Title

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Product Name Asset Class Product Category Description
Global Balanced Sustainable Fund Multi-Asset Sustainable Objective & Impact

Seeks an attractive level of total return by managing a broad asset mix within a targeted risk range of 4-10%. The fund invests primarily in equity securities, fixed income securities, money market instruments and cash. Environmental, social and governance (ESG) factors are integrated into its process and, through screening, it excludes companies associated with severe ESG controversies or involved in certain activities, such as coal, oil sands, tobacco, gambling, controversial weapons and civilian firearms. It is expected that 5-30% of assets will be invested with managers who explicitly aim for positive environmental and social outcomes. The investment team engages with companies on ESG issues they deem material in terms of risk, return or impact.

Global Sustain Fund Equity Sustainable Core

The investment team believes that the best way to compound your wealth is by owning very high-quality companies with sustainable high returns over the long term. Material social and environmental risks to the sustainability of high returns are more important than ever, given political and technological change. Leading the way on such issues can be a positive force for corporate success if it drives consumer and/or employee engagement. The higher the quality of a company, the more important the governance, as management has more degrees of freedom to mismanage the business. The team believes that investing with a conscience is fully compatible with generating attractive long-term returns. The Fund will not knowingly invest in any company whose core business activity (one that accounts for more than 10% of the relevant company’s revenue) involves tobacco, alcohol, adult entertainment, gambling, gas and electric utilities, bulk commodities including fossil fuels, civilian firearms and weapons.

Sustainable Euro Corporate Bond Fund Fixed Income Sustainable Core

Seeks to provide an attractive rate of relative return, measured in Euro, through investment in Euro denominated fixed income securities issued by corporations that fulfil MSIM’s Fixed Income Securities’ ESG criteria. Sustainable management of the Fund incorporates active engagement with company management regarding ESG related issues they may be facing. The Fund will not knowingly invest in corporations that generate revenue from the manufacturing or production of landmines and cluster munitions; firearms; and tobacco.

Sustainable Euro Strategic Bond Fund Fixed Income Sustainable Core

Seeks to provide an attractive rate of relative return, measured in Euro, through investment in Euro denominated fixed income securities issued by corporations, government or government guaranteed issuers that fulfil MSIM’s Fixed Income Securities’ ESG criteria. Sustainable management of the Fund incorporates active engagement with company management regarding ESG related issues they may be facing. The Fund will not knowingly invest in corporations that generate revenue from the manufacturing or production of landmines and cluster munitions; firearms; and tobacco.

Sustainable Fixed Income Opportunities Fund Fixed Income Sustainable Core

The Fund seeks to provide an attractive rate of return, measured in GBP, through an active, flexible approach to investing in global fixed income securities. Sustainable management means that the Investment Adviser integrates Environmental, Social and Governance (“ESG”) considerations into its investment decision-making, with minimum thresholds of sustainability for the corporates and sovereigns in the portfolio. The Fund will not knowingly invest in corporate sectors that are not aligned with the Investment Adviser’s sustainable investing approach, nor in securities of issuers that are subject to Fund’s ESG exclusion policy (Please refer to Fund’s Restriction Screening Policy for full details). For corporate holdings, the Fund will maintain a lower carbon footprint than the corporate bond component of the Bloomberg Barclays Global Aggregate Index. The Fund may hold a proportion of its portfolio in Sustainable Bonds, defined as labelled debt instruments where the issuer has committed to financing or attaining specific environmental and/or social objectives.

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