Morgan Stanley Wealth Management brings Investing with Impact Australia


  • Morgan Stanley’s Investing with Impact framework offers clients services and research to help them determine the impacts of their portfolios and investments
  • Morgan Stanley says the depth and breadth of products and services is evolving to match people’s financial investment profile
  • Nathan Lim outlines four buckets to ethical/responsible investing

Morgan Stanley Wealth Management is bringing its Investing with Impact framework to Australia to help clients define and construct investment solutions that match their ethics and values to the investments that they make.

Morgan Stanley Wealth Management’s Investing with Impact Australia framework is offering clients four products and services:

  1. Portfolio review, which allows clients to screen their investments for 57 different data points across various issue areas
  2. Alignment Scoring for Managed Funds and ETFs, a scoring methodology that assesses “a fund’s stated impact strategy against its goals. We also conduct holdings-based analysis on each fund we review as part of our assessment process.”
  3. Access to global capital markets, which allows “sophisticated” (read: high net worth) clients to access capital market offerings incorporating positive impact, including green bonds.
  4. Analysis and thought leadership – ideas and insights from Morgan Stanley Sustainability Research and Morgan Stanley Institute for Sustainable Investing.

“The market has moved on, and there’s a lot more depth and breadth for investors in the market,” says Nathan Lim, head of wealth management research at Morgan Stanley. “The most important aspect from my perspective at Morgan Stanley is that we’re in the position of being platform agnostic – we don’t have to sell a Morgan Stanley product. It’s more a process of, here’s what I have available, of the providers this is the best. I’m able to bring that neutrality and add other elements in the investing of impact – being a referee as well with the alignment scoring.”

Morgan Stanley established the global Invest for Impact platform in 2012, and it is now available in Australia.

“The ethos was that investing with impact aims to generate market rate financial returns while demonstrating environmental and/or social positive impact that aligns with your personal values with your financial values as well,” Nathan says. “The thing we point to is that individuals focus their time on things that matter to them on a personal basis – do you recycle, do you use a Keep Cup, do you use a reusable shopping bag at the super market? People are using a conscious decisions to make an impact on society, but one of the biggest impacts you can make is your financial impacts – your super, your financial investments, why can’t people apply that same sort of enthusiasm to their financial portfolio as well?”

Morgan Stanley breaks ethical investment into four buckets, Nathan says. The first bucket is negative screening – avoiding investments in companies that investors deem as being out of step with their ethical framework – tobacco, or cluster munitions, or gambling, or fossil fuels.

“Restriction is distinct from [environmental, social and governance] integration, because ESG is looking at non-financial aspects of a company’s performance to determine financial viability of a business,” Nathan says. “Say you have a mining operation, and this mining operation, as all mining operations, is highly dependent on access to fresh water. This mine shares water with a local community. What happens when there is a drought, and the water must be allocated away from the mine to the community? That non-financial risk is not explicit in the P&L or the balance sheet, and that’s what ESG integration seeks to do, it wants to look at the holistic view of the company.”

The third bucket is “thematics” – investments in macro themes like climate change or poverty reduction that have a positive benefit on global economic and social challenges.

“An example of that is, say, climate change – somebody can have a moral reason not to invest in coal because they believe it will damage the environment and they don’t want that,” Nathan says. “That’s a personal value. From a thematic perspective, someone who recognises that climate change is real and that we as a society has to deal with, avoiding coal is only half of the answer. You need to think about we live in a modern society, we need conveniences like electricity. What can we support or encourage that push us towards dealing with climate change. That’s where you get investments in solar power, energy technology. That’s where the positive elements start coming through from a positive thematic.”

The fourth bucket is impact investing, which mainly takes place in private markets through asset classes like private equity.

“The way I like to describe impact investing is philanthropy but with investment hurdles,” Nathan says. “It considers non-financial returns in the return argument to the investor. You’ll consider financial return and non-financial factors like, if you’re funding a soup kitchen, the number of meals served, or  if it’s a program to address homelessness, you measure the number of homeless people given shelter. There’s a good example of SVA  who have a fund that lent money to STREAT which targets children at risk of reoffending. The loan was extended on a commercial basis, but the outcome is measured because it helps at-risk children to avoid reoffending.”

Nathan believes that Australian investors will see a massive expansion in the ways in which they can invest in alignment with their values.

“The investor that is seeking alignment with their values, that is seeking to invest with responsible principles in mind, recognise this for what it is,” he says. “It is finally an easy to understand way of accessing a market that has been difficult to assess.”