Insight Article Desktop Banner
Insight Article
January 18, 2022

The Search for Better Outcomes

Insight Video Mobile Banner
January 18, 2022

The Search for Better Outcomes

Insight Article

The Search for Better Outcomes

Share Icon

January 18, 2022


2021 ended with the re-introduction of restrictions to deal with the new Omicron variant of COVID-19 and it is not clear whether 2022 will see companies muddling through or rising to the challenge of delivering better outcomes. Read more Hear more from the International Equity Team’s Head of Sustainable Outcomes, Marte Borhaug.


What is a better outcome? As long-term investors we seek to deliver better outcomes for our clients through producing attractive returns. In order to do that we must invest with a conscious eye on whether companies can deliver better outcomes not just today but 5, 10 and even 20 years from now. We back companies that have the characteristics needed to lead in the long run, like recurring revenue, pricing power and strong management, and importantly also have the awareness to invest in managing and improving their ESG impact.

This logic is consistent with how humans have evolved. If we are to believe the latest neuroscience,1 humans inherently seek ‘better outcomes’ and, perhaps contrary to common belief, it is not the achievement that gives us satisfaction but the journey itself. We do this because a ‘seeking system’ gives us a feeling of reward and pleasure when we explore our surroundings and seek new information for survival. Similarly, companies seeking to deliver better outcomes and faced with a changing world must explore their surroundings and seek new information for survival.

Looking back on 2021, they had plenty of change to manoeuvre. Instead of a pure ‘return to normal’, 2021 has been a year of continued headwinds. Although we saw signs of a bounce back as COVID-19 lockdown measures lifted in the spring plus sharp earnings growth, a number of economic challenges have lingered: from supply chain disruption and labour shortages to intensified China-US trade and political tensions.

Despite these issues, equity markets continued to boom, buoyed by positive vaccine rollout news, with growth stocks and more cyclical value stocks taking turns to drive the market forward, seemingly unphased by peak earnings and peak margins or persistent inflation taking hold. The dangers of earnings and multiple correction grew larger, but seemed always just beyond the horizon. Investors started the year leaning into the cyclical rally but ended the year looking for more defensive positioning, which may bode well for quality investors.

We also saw ESG momentum continue to build in 2021, with USD $139.2 billion2 of flows globally going into ESG funds. In Europe, the most mature sustainable investment market, this shift to ESG funds has been via active management. This is not a surprise. It’s hard to remain passive in the face of challenges like climate change; if you believe the world is going to change significantly as sustainability externalities start to be ‘priced in’, there will be winners and losers creating investment risks and opportunities. Being on the right side of that change is key.

DISPLAY 1: Global sustainable fund flows Q4 2018 - Q3 2021

Source: Morningstar, 31 December 2021

Sustainable fund flows Q4 2018 - Q3 2021, Europe and US

Source: Morningstar, 31 December 2021


Underlying the shift towards ESG is evidence that more and more countries are taking steps to create a more sustainable society and economy. Most of the actions in 2021 were linked to COP26 (the 26th United Nations Climate Change Conference) that took place in Glasgow in November. The pressing urgency of the climate challenge brought a series of new commitments to tighten carbon targets, phase ‘down’ coal, removal of fossil fuel subsidies, tackle methane emissions and stop deforestation. Countries representing 70% of global emissions and GDP have now committed to reaching net zero by 2050 or 2060, with massive implications for many corporates— Display 2. Regulators acted too—and some have come a long way. In Europe new sustainable investments3 that aim to give clients more transparency around sustainable investment came into force and the European Central Bank presented an action plan to include climate change considerations in its monetary policy strategy.4 In the US the SEC has moved from throwing out investor proposals pushing companies like Exxon on climate change in 2019, to forcing companies to hold investor votes on emission targets in 2021.5 Whether one believes the pace of change is too fast or too slow, the direction of change is clear.

For the year ahead, the environment remains uncertain, whether one looks at it through the lens of economics, health, politics, or sustainability, but we believe there are three trends that will shape outcomes for companies, economies and societies.

DISPLAY 2: Coverage of announced national net zero pledges

Source: International Energy Agency (2021), Net Zero by 2050, IEA, Paris


First, after a pandemic that has so far seen 230 million cases and nearly 5 million deaths, we expect a stronger push on social challenges, from diversity to inequality, as economies get back on their feet. COVID-19 has not only hit companies and economies but has put the world back two decades in the fight against poverty, as vulnerable countries and groups of people have shouldered the brunt of the burden.6 The pressure on companies to play their part in tackling inequality is likely to continue, from eliminating race and gender inequities to protecting the human rights of workers in the supply chain. This year we already saw the introduction of Nasdaq’s new rules7 requiring firms to disclose board-level diversity statistics and have, or explain why they do not have, at least two diverse directors. Similar diversity measures were also announced by the Hong Kong stock exchange, making it clear that ‘a single gender board is not considered to be a diverse board’ and calling on companies to appoint a director of a different gender.

We are also seeing increased action from policy-makers and investors. On human rights, the EU is considering rules to make human rights due diligence mandatory while the global responsible investor organisation the UNPRI has announced a new global collaborative platform to support investors in taking action on social issues.8 Together these pressures are likely to lead to greater action on the S in ESG.

Second, work will turn from climate commitments to policy reality—and so watch out for more laws, fiscal incentives, investor pressure as well a continuation of rising climate litigations as the transition to low carbon continues. This will not only impact the fossil fuel industry. For example, the car industry—whether it’s proposals to effectively ban new fossil fuel cars from as early as 2035 like the EU or suggesting new incentives for electric vehicles like the US, the economic rules of the game are changing. Every sector will need to change and companies who want to stay ahead will need to adapt now or risk ending up in the company graveyard.

Third, next year could prove to be the year of ‘nature’ as countries meet for the much less talked about COP15 (the 15th United Nation conference on biodiversity) to address the depletion of planetary resources.9 Targets will be set in Kunming in China for the next decade and commitments from both governments and the private sector have already emerged. A coalition of more than 50 countries has committed to protect almost a third of the planet by 2030.10 We’re also seeing the emergence of voluntary disclosure frameworks for companies (Taskforce on Nature-related Financial Disclosures – TNFD) and investors promising to eliminate agricultural commodity-driven deforestation risks across their investment portfolios and invest in nature-based solutions. Although new targets are unlikely to lead to an immediate price on free resources such as water, air, forests, and the ocean, it should speed up government action, business decisions and investment allocations. Companies looking to future proof their business will need to understand how dependent they are on planetary resources and how they are impacting nature through their products and services to take action to manage the risks and explore opportunities.

Whatever the pace of change in 2022, efforts to create a sustainable future is a game that’s played out in decades, not months. Just like any journey, there will be bumps in the road but as the transition takes place, we believe companies with a strong ‘seeking system’ that helps them be alert to the world around them will help them stay on top of their game and deliver long-term returns for clients. As bottom-up stock pickers, and with my role as Head of Sustainable Outcomes for the International Equity team, we’re determined to keep seeking better outcomes, to learn and improve our offering to you and to keep pressing for progress from the world’s best companies.


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 Sustainable Outcomes
International Equity Team
Featured Funds
Featured Video
The Search for Better Outcomes - Video
Insight thumbnail video icon
Whether looked at through the lens of economics, health, politics or sustainability, what outcomes might we see in the year ahead? Hear more from the Marte Borhaug, Head of Sustainable Outcomes for the International Equity Team.

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.

Forecasts and/or estimates provided herein are subject to change and may not actually come to pass. Information regarding expected market returns and market outlooks is based on the research, analysis and opinions of the authors or the investment team. These conclusions are speculative in nature, may not come to pass and are not intended to predict the future performance of any specific strategy or product the Firm offers. Future results may differ significantly depending on factors such as changes in securities or financial markets or general economic conditions.

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 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.

Eaton Vance is part of Morgan Stanley Investment Management. 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.


Dubai: 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 for the Eaton Vance and Calvert Funds please download one at or contact your financial professional. Please read the prospectus carefully before investing.

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

Eaton Vance Distributors, Inc. (“EVD”), serves as the distributor for Eaton Vance and Calvert Funds.


Hong Kong: This material has been issued by Morgan Stanley Asia Limited for use in Hong Kong and shall only be made available to “professional investors” as defined under the Securities and Futures Ordinance of Hong Kong (Cap 571). The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Accordingly, save where an exemption is available under the relevant law, this material shall not be issued, circulated, distributed, directed at, or made available to, the public in Hong Kong. Singapore: This material should not be considered to be the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under section 304 of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”); (ii) to a “relevant person” (which includes an accredited investor) pursuant to section 305 of the SFA, and such distribution is in accordance with the conditions specified in section 305 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. This publication has not been reviewed by the Monetary Authority of Singapore. Eaton Vance Management International (Asia) Pte. Ltd. (“EVMIA”) holds a Capital Markets Licence under the Securities and Futures Act of Singapore (“SFA”) to conduct, among others, fund management, is an exempt Financial Adviser pursuant to the Financial Adviser Act Section 23(1)(d) and is regulated by the Monetary Authority of Singapore (“MAS”). Eaton Vance Management, Eaton Vance Management (International) Limited and Parametric Portfolio Associates® LLC holds an exemption under Paragraph 9, 3rd Schedule to the SFA in Singapore to conduct fund management activities under an arrangement with EVMIA and subject to certain conditions. None of the other Eaton Vance group entities or affiliates holds any licences, approvals or authorisations in Singapore to conduct any regulated or licensable activities and nothing in this material shall constitute or be construed as these entities or affiliates holding themselves out to be licensed, approved, authorised or regulated in Singapore, or offering or marketing their services or products. Australia: This publication is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 314182, which accept responsibility for its contents. This publication, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act. EVMI is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of the provision of financial services to wholesale clients as defined in the Corporations Act 2001 (Cth) and as per the ASIC Corporations (Repeal and Transitional) Instrument 2016/396. Calvert Research and Management, ARBN 635 157 434 is regulated by the U.S. Securities and Exchange Commission under U.S. laws which differ from Australian laws. Calvert Research and Management is exempt from the requirement to hold an Australian financial services licence in accordance with class order 03/1100 in respect of the provision of financial services to wholesale clients in Australia.

For professional investors, this material is circulated or distributed for informational purposes only. For those who are not professional investors, this material is provided in relation to Morgan Stanley Investment Management (Japan) Co., Ltd. (“MSIMJ”)’s business with respect to discretionary investment management agreements (“IMA”) and investment advisory agreements (“IAA”). This is not for the purpose of a recommendation or solicitation of transactions or offers any particular financial instruments. Under an IMA, with respect to management of assets of a client, the client prescribes basic management policies in advance and commissions MSIMJ to make all investment decisions based on an analysis of the value, etc. of the securities, and MSIMJ accepts such commission. The client shall delegate to MSIMJ the authorities necessary for making investment. MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. All investment profits and losses belong to the clients; principal is not guaranteed. Please consider the investment objectives and nature of risks before investing. As an investment advisory fee for an IAA or an IMA, the amount of assets subject to the contract multiplied by a certain rate (the upper limit is 2.20% per annum (including tax)) shall be incurred in proportion to the contract period. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. Indirect charges also may be incurred, such as brokerage commissions for incorporated securities. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. in advance. All clients should read the Documents Provided Prior to the Conclusion of a Contract carefully before executing an agreement. This material is disseminated in Japan by MSIMJ, Registered No. 410 (Director of Kanto Local Finance Bureau (Financial Instruments Firms)), Membership: the Japan Securities Dealers Association, The Investment Trusts Association, Japan, the Japan Investment Advisers Association and the Type II Financial Instruments Firms Association.


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.