Engagement
and Stewardship
Principles
Public Markets

June 2023

Engagement
and Stewardship
Principles
1

MSIM is a predominately active investor and Investment teams
are responsible for monitoring the performance of companies
throughout the investment process. The extent and frequency ofmonitoring varies across Investment teams and is dependent on anumber of factors including the investment strategy and thesize of interest held. Some Investment teams actively monitor
at the stock level by evaluating company fundamentals,
financials and management, including sustainability
management. Others approach portfolio construction using
a top down, macro approach to strategic asset allocation andundertake thematic engagements with selected companies
across the portfolio, as needed. Monitoring of companies inwhich MSIM invests may include, but is not limited to:1

Our Stewardship Philosophy

As long-term investors, and active owners, we
believe we have a duty to be good stewards of the capital
we manage. We fulfill this duty by engaging with thecompanies in which we are invested and by exercising our
proxy voting rights. These stewardship activities give us theopportunity to guide companies in which we invest toward
better governance practices, which we believe produce
long-term, sustainable returns.

2

Our Engagement Process and Methods

MSIM works to ensure that shareholder engagement
is effective and works in the best interest of clients to improve
the long-term returns from the companies in which we invest.
Engagements are conducted regularly by Investment teams
and the Global Stewardship Team, which is dedicated topromoting investment stewardship activities, including
proxy voting and engagement, across the firm.
Investment teams engage with companies throughout theirinvestment process on a broad range of issues including acompany’s strategy, financial and non-financial performance,risk management, corporate governance, sustainability
initiatives, and capital structure.

Developing proprietary quantitative models to forecast
performance, leveraging third party data services;

Conducting proprietary and reviewing external research;

Attending company presentations and / or analyst conferences;

Our Engagement Priorities

A key input in our investment selection process is anassessment of the quality of the board and senior management.
To develop that knowledge, Morgan Stanley Investment
Management (“MSIM”) engages with company management
at regular intervals, and prioritizes active dialogues where
positions are significant and issues are viewed as material.

3



Reviewing and analyzing relevant public information publishedby the company (which may include a company’s quarterly
financials, earnings calls, general company reporting and / ordisclosures, including sustainability-related disclosures);

Where appropriate, engaging directly with companies
in which MSIM invests (which can include engagement withcompany executives and board members through in-person
meetings, conference calls and email correspondence);
Ongoing monitoring of external events that may impact
company performance, e.g. regulatory changes, news events;

As long-term investors and active owners, MSIM believes that
good corporate governance and sustainability practices are asignal of management quality and that well-managed companies
produce long-term sustainable returns. To identify strong
corporate governance and sustainability practices, a range of
non-financial performance metrics are reviewed by Investment
Teams and the Global Stewardship team. Non-financial
performance metrics may include corporate ESG disclosuresand third party ESG data providers.
A majority of engagements led by the Global Stewardship Teamfocus on shareholder meetings and take place during proxyseason. During these engagements, the Global Stewardship Teamand members of relevant Investment teams, meet with company
management and when appropriate, a member or members of
the board of directors to discuss the company’s proxy, including
but not limited to executive compensation, board structure, ESG
issues and shareholder proposals. Topics of routine engagements
focus on governance best practices such as board independence,
succession planning, and executive pay. Other topics ofconsideration include the company’s sustainability initiatives andgoals, and corporate culture. The Global Stewardship team may

Morgan Stanley Investment Management Engagement & Stewardship Principles represents Morgan Stanley Investment Management’s engagement policy
for the purposes of Shareholder Rights Directive II (Directive (EU) 2017/828 amending Directive 2007/36/EC)
1

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ENGAGEMENT AND STE WARDSHIP PRINCIPLES|JUNE 202 3

request engagement outside of the normal proxy process in
response to a company headline event or to proactively discuss
thematic ESG issues. In these cases, the Global Stewardshipteam may contact the company and request a meeting with theappropriate management team and/or a member or members of
the board of directors. MSIM selectively interacts with company
boards when necessary and beneficial to the engagement
process. MSIM engagements are carried out through a mix ofconference calls, in-person meetings and email correspondence.

4

Engagement Monitoring and Escalation

Our regular touchpoints with company management
provide an opportunity to monitor and track the performanceof our investments. Both investment teams and the Global
Stewardship Team regularly monitor and engage with companies
throughout the investment process and maintain engagement
records to track progress and to allow engagement insights
to be incorporated in investment and proxy voting decisions.
Given the regular cadence of our engagements, and our
position as long-term owners, the need for escalation is
generally limited. Further, we appreciate that in some cases
it can take years to move the dial on certain issues.
We consider an engagement successful when a company
is receptive to our viewpoints and suggestions and takes
concrete steps to implement them. In cases where a company
is not receptive or where our engagements do not lead todesired results, we may cast votes against management,
request meetings with board members, or write lettersto boards and management. In some cases, repeated,unsuccessful engagements may contribute to a decision to
decrease or exit a holding. Additionally, we may consider
collective engagement as an escalation method. Ultimately,
portfolio managers are responsible for interpreting andintegrating information gained through engagements into
their investment decision-making process, as appropriate.

5

Collective Engagement

Morgan Stanley Investment Management frequently
engages with portfolio companies and generally finds thatthese one on one discussions are the most effective way toarticulate our views to a company’s management. However,
we are supportive of collective engagement where suchengagement appears necessary in order to materially enhance
portfolio values and where we can do so in a manner that is infull compliance with applicable laws, regulations and judicial
precedents. For example, we occasionally participate in collective
engagements organized by issuers, which provide an open forum
for investors. In addition, as a signatory to the Principles for
Responsible Investment (UN PRI) and the 2020 U.K. Stewardship
Code and members of other international investor networks,
we have the ability to collectively engage when appropriate.
For example, as a member of the Sustainability AccountingStandards Board (SASB) Investor Advisory Group, we

engage with fellow investors to promote the SASB reporting
standards. Morgan Stanley Investment Management’s decision
to participate in collective engagement will always consider
the impact on our clients. Other considerations include, but
are not limited to: potential conflicts of interest, materialityof the issue, and probability of change.

6

Transparency and Reporting

The Global Stewardship team and portfolio teams
track engagements to inform investment and proxy voting
decisions, and future engagements. The Global StewardshipTeam shares engagement highlights, including a total
count of engagements broken down by region, in an annual
Stewardship report. The Global Stewardship Team andindividual investment teams may also share additional
engagement details with interested clients.
MSIM does not seek or solicit insider information through ourengagement efforts. Rather, the purpose of our engagement
efforts it to obtain clarity around public disclosures and toestablish productive dialogue with management and the board.
Like all Morgan Stanley Investment Management employees,
the Global Stewardship Team and portfolio teams regularly
undergo compliance training regarding non-public informationand conflicts of interest. MSIM’s Proxy Voting Policy outlines its
approach to material conflicts of interest in the voting process.
If you have any questions on this document, please contact the
MSIM Stewardship Team at mbproxy@morganstanley.com.
Related Documents: publicly available by accessing the “About
Us” section on our website –  www.morganstanley.com/im;








Morgan Stanley Investment Management’s Proxy Voting Policy
and Procedures
Morgan Stanley Investment Management Sustainable
Investing Policy
Morgan Stanley Investment Management’s Global
Stewardship Report organ Stanley Investment Management’s U.K.
M
Stewardship Code Report

Further Information
If you have any questions about this document, please contact the
MSIM Stewardship Team at mbproxy@morganstanley.com.
Related documents are publicly available on
www.morganstanley.com/im/sustainability.
 Morgan Stanley Investment Management’s Proxy Voting Policy
and Procedures
 Morgan Stanley Investment Management’s Sustainable
Investing Policy Morgan Stanley Investment Management’s Global
Stewardship Report Morgan Stanley Investment Management’s U.K. Stewardship
Code Report

JUNE 202 3|

ENGAGEMENT AND STE WARDSHIP PRINCIPLES

6

Risk Considerations
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 orinvestments are in or out of favor in the market. As a result, there is no assurance ESG strategies could result in morefavorable investment performance.
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 values of securities owned by the Portfolio will decline and that the value of Portfolio shares may therefore be less thanwhat you paid for them. 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, andpotential adverse effects (e.g. portfolio liquidity) of events.
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. The risks of investing in emerging market countries are greater thanrisks associated with investments in foreign developed countries. Fixed income securities are subject to the ability of an issuer to maketimely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer andgeneral market liquidity (market risk). In the current rising interest-rate environment, bond prices may fall and may result in periodsof volatility and increased portfolio redemptions. Longer-term securities may be more sensitive to interest-rate changes. In a declining
interest-rate environment, the portfolio may generate less income. Real estate investments, including real estate investment trusts,
are subject to risks similar to those associated with the direct ownership of real estate, and they are sensitive to such factors as
management skills and changes in tax laws.

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ENGAGEMENT AND STE WARDSHIP PRINCIPLES|JUNE 202 3

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 andare 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 thedate of publication. The views expressed do not reflect the opinions of all
investment personnel at Morgan Stanley Investment Management (MSIM) andits 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 theauthors or the investment team. These conclusions are speculative in nature,
may not come to pass and are not intended to predict the future performanceof 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 informationand the Firm has not sought to independently verify information taken frompublic and third-party sources.
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purposes and does not constitute an offer or a recommendation to buy orsell any particular security or to adopt any specific investment strategy. The
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