Scott Trager: We believe in making the best proprietary and third-party asset manager investment strategies available to our clients. These mutual funds, ETFs, separately managed accounts and alternative investment opportunities (for qualified investors) have the ability to generate market-rate financial returns as well as measurable positive environmental and social impacts. Through our Morgan Stanley proprietary framework, we have clarified the spectrum of approaches across which the investment strategies currently fit. This framework should be considered alongside Morgan Stanley’s traditional asset allocation, analysis and investment selection process.
The first approach in the framework is values alignment, which minimizes exposure to objectionable industries through restriction screening. The second approach is environmental, social and governance (ESG) integration. This approach proactively considers ESG criteria alongside financial criteria to identify opportunities and risks during the investment selection process. The third approach is thematic exposure, focused in terms of the sector or theme the client is trying to address. For example, sectors dedicated to sustainability related domestic and global challenges such as climate change, diversity and inclusion, access to affordable housing and more. The fourth approach is impact investing in private enterprises whose business models are designed to create positive environmental and social outcomes.
Where we see value-add opportunities as a firm we will innovate and develop new strategies on behalf of our clients.
Ellis: How do you communicate with Morgan Stanley advisors about the investment strategies available to their clients through the Investing with Impact platform?
Scott Trager: The goal is to make it as simple as possible to integrate the platform into an advisor’s day-to-day activities. That said, you know that successful advisors have created effective practice management systems and pivoting toward a new opportunity such as Investing with Impact may not always come easily.
So one of the things we have done through both the thought leadership and research of the Institute for Sustainable Investing and the work of the Investing with Impact platform is to codify the client interest in investing with impact so that advisors can understand the demand.
Ellis: You mean client interest within the Morgan Stanley client base of over three million households?
Scott Trager: Correct. The Institute for Sustainable Investing released a study in the first quarter of 2015 that polled individual investors. The poll showed that 71 percent of individual investors are interested in sustainable investing and yet 54 percent of those surveyed believe choosing between impact and financial gains is a trade-off. I think that financial advisors are somewhat reflective of the general population and have some of those beliefs as well.
Ellis: I can tell you from my experience in consulting with them that they absolutely do.