Climate
Report 2023

June 2024

TABLE OF CONTENTS

1

7

26

Introduction

Strategy

Metrics & Targets

3

22

29

Governance

Risk
Management

Important
Information

Introduction

MSIM refers to the investment
management business segment of
Morgan Stanley, a global financial
services firm. MSIM operates outof a number of wholly-owned
subsidiaries of Morgan Stanley,
including MSIM Ltd and EVAIL,
and for the purpose of this Climate
Report references to “MSIM” shall
include Morgan Stanley & Co.
International Plc (“MSIP”) in relation
to the portfolio management
activities undertaken by MSIP in
relation to certain MSIM funds.
Other legal entities included in the
MSIM business segment, but which
are out of scope for the FCA’s TCFD
reporting requirements, are notcovered by this Climate Report.
1

Throughout this Climate Report,
references to “Morgan Stanley”,“Firm” and “Firmwide” are referring
to Morgan Stanley and its
consolidated subsidiaries. In someinstances, MSIM may leverageor be a part of Morgan Stanley’s
processes and/or initiatives related
to sustainable investing.
2

Throughout this Climate report,
references to “MSIM”, “we”, “us”,“our”, “the investment management
division and/or segment” aregeneral references to thecollective investment management
subsidiaries of Morgan Stanley.
Certain subsidiaries may differ intheir approach to ESG investing;therefore the discussion of ESG
investing described herein may not
be applicable to or representative ofeach Morgan Stanley affiliate.
3

Morgan Stanley Investment Management(“MSIM”)1 is the investment management divisionof Morgan Stanley,2 and provides broad-based
specialisation across a range of asset classes inpublic and private markets worldwide.3 MSIM has
been creating value for its clients for over 45 years
and operates in more than 20 countries. MSIM has$1.5 trillion in assets under management (“AUM”)
as of December 31, 2023. MSIM’s independent
investment teams leverage Morgan Stanley’s
global resources to serve a diverse client base ofgovernments, institutions, corporations, advisors andindividuals worldwide. MSIM’s investment solutions
include a broad range of high-conviction active
strategies, alternatives, customisation strategies andsustainability expertise.
MSIM believes that environmental, social and governance (“ESG”) factors may
present investment risks and opportunities. Understanding and managing these risks
and opportunities may therefore contribute to both risk mitigation and long-term
investment returns. Engagement and stewardship are a key part of this understanding,where investment teams seek to engage with the assets or companies they own,
seeking to deliver long-term value and this approach aligns with our objective to be
responsible stewards of our clients’ capital.
MSIM has a decentralised approach towards investment management, consisting of
independent public- and private-markets investment teams and asset class platforms. This
decentralised investment approach allows investment teams to tailor their approach tosustainability, consistent with their fiduciary duty, using multiple factors including, but notlimited to, the objectives of the product, asset class and investment time horizon, as well

as the specific research and portfolio construction, philosophy and process used by eachteam. Investment teams deploy their skill and judgment in assessing the materiality of ESGrelated risks and opportunities as appropriate for each investment strategy.4
This Climate Report has been prepared in accordance with the Task Force on ClimateRelated Financial Disclosures (“TCFD”) recommendations, and the rules and guidance set
out in the Environmental, Social and Governance sourcebook of the Financial Conduct
Authority’s (“FCA”) handbook.5 This Climate Report has been produced at the MSIM businesssegment level, as the portfolio management activities in scope of the FCA’s TCFD reporting
requirements under the ESG Sourcebook (“FCA TCFD in-scope business”) leverage and area part of MSIM’s broader processes and/or initiatives relating to investment and climate risk
management. Disclosures on our portfolio management services and specific approaches
adopted at product level can be requested on demand by clients who have a legal or
regulatory entitlement to receive TCFD-related information.
For the purposes of the FCA’s requirements, the reporting entities are Morgan Stanley
Investment Management Limited (“MSIM Ltd”), Eaton Vance Advisers International
Limited (“EVAIL”) and Morgan Stanley & Co. International Plc (“MSIP”)6 (collectively, the“TCFD in-scope entities”). The TCFD in-scope entities are each wholly owned subsidiaries
of Morgan Stanley, established in England and Wales and regulated by the FCA withrespect to the provision of investment management services to clients.
While this Climate Report is focused on climate-related issues, these are only some of
the many considerations that may be taken into account in the management of our funds
and managed portfolios.
Please note that this Climate Report relates to the reporting period from January 1,
2023 – December 31, 2023. The organisational structures, governance, policies andpractices in relation to the TCFD in-scope entities, as described in this Climate Report,
may evolve and change over time, as we continue to enhance our approach to investing
and climate risk management, as well as our control framework generally (having regard
to considerations such as changing regulatory expectations, best practice and client
feedback, among others).

Some investment strategies do
not consider ESG factors where
it is not currently feasible orappropriate to do so, e.g. passive
investment strategies, certain asset
allocation strategies, or if not inline with the specific research andportfolio construction, philosophy
and process used by each team, orclient requests.
5
See chapter 2 of the ESG
Sourcebook. The content and/or structure of future reports
may vary, as regulations andguidance evolve.
6
In relation to MSIP, the scope of
this Climate Report is limited toportfolio management activities
undertaken by MSIP in relation
to MSIM funds. It does not cover(i) any MSIP activities that are inscope of TCFD reporting outsideof these portfolio management
activities; or (ii) any other MSIP
activities which are not in scopeof TCFD reporting. Please refer
to MSIP’s Annual Report and
Financial Statements for further
entity level climate-related financial
disclosures consistent with the
TCFD recommendations concerning
MSIP, which have been preparedin accordance with the Companies(Strategic Report) (Climaterelated Financial Disclosures)
Regulations 2022.
4

The disclosures in this Climate Report, including any third-party or group disclosures cross-referenced in it (insofar as
they relate to the FCA TCFD in-scope business of the TCFD in-scope entities), comply with the requirements of chapter
2 “Disclosure of climate-related financial information” of the Environmental, Social and Governance sourcebook
included in the FCA’s Handbook.

RUAIRI O’HEALAI

Co-COO at Morgan Stanley Investment Management

2

CLIMATE REPORT 2023

Governance

MSIM has implemented governancesystems that aim to deliver effective
management and oversight ofsustainability issues including climate
risk management.
MSIM’s governance approach reflects its business structure
as the investment management division of a global financial
services firm, which comprises multiple legal entities indifferent jurisdictions, with respective boards of directors
and governance structures, that leverage MSIM’s processes
relating to investment and climate risk management.

7

Further information on the Firmwide sustainability-related
governance structure can be found in Morgan Stanley’s
Firm-level ESG disclosures.7
We view effective management of sustainability issues as
an important component of our business approach as we
believe it is fundamental to the long-term success of ourorganisation and our ability to deliver on the objectivesof relevant financial products we manage for our clients.
We have governance systems, risk management processes
and controls that seek to support the incorporation ofsustainability considerations (including climate risk) within
our business activities where relevant.

For more information see the Morgan Stanley Firm-level ESG disclosures.
CLIMATE REPORT 2023

3

Board Oversight
Board-level oversight at MSIM extends across theorganisation, with legal entities and funds having theirown boards as required. Sustainability- and climate-related
matters form a part of the strategy and risks overseen
by boards of directors across MSIM, as appropriate.
Boards across MSIM oversee the business activities ofeach relevant entity. Control and oversight functions
have clear escalation channels to enable the boards, tobe informed of climate-related issues as part of their roleoverseeing management of sustainability matters for theirapplicable products.
TCFD IN-SCOPE ENTITIES BOARD OVERSIGHT

The responsibilities of the boards of the TCFD in-scope
entities include the following activities as applicable: (i)approval of the strategy in relation to the legal entity;(ii) approval of the legal entity’s risk appetite and risk
tolerance statements and limits; and (iii) approval ofmaterial regulatory filings or regulatory public disclosuresrelating to the legal entity.
In carrying out their responsibilities, the boards of
the TCFD in-scope entities receive updates from the
MSIM Sustainability team and other key stakeholders
on sustainability and ESG matters, as relevant andappropriate, including regulatory updates, productdevelopment and strategic initiatives related to climate
matters. The frequency of these updates depends on therelevance for each TCFD in-scope entity board, in terms ofscope of products and applicable regulations.

4

CLIMATE REPORT 2023



MSIM LTD BOARD: In 2023, sustainability-related discussions

at the MSIM Ltd board meetings included theenhancement of governance and control processes, thecontinued expansion of the MSIM sustainability andclimate investment solution offering within certain
investment platforms and key regulatory projectlevel updates.


EVAIL BOARD AND MSIP BOARD: In 2023, these boards

received certain updates on sustainability-related mattersfrom other functions; however due to the nature of their
FCA TCFD in-scope business, the MSIM Sustainability
team did not provide any updates on sustainabilityrelated matters to them during the reporting period.
Several of the products managed by MSIM Ltd
have climate-related targets or are aligned to thedecarbonisation objectives of the Paris Agreement,(a global commitment that seeks to curb emissions).
Relevant updates against climate-related targets arereported to the MSIM Ltd board, as appropriate, to enable
oversight and monitoring. Centrally, teams and working
groups across the MSIM governance structure strive toensure that investment teams have sufficient resources,
insights and tools to provide long-term value to clientsby taking into account climate-related issues and theinvestment objectives of such products, where relevant
and appropriate.
MSIM’s governance structure seeks to ensure thatinvestment teams consider sustainability issues (including
climate-related issues) where appropriate and with a view
to MSIM acting in clients’ best interests.

Management’s RoleManagement Committees, Working Groups and Teams
The below provides an overview of the management-level committees, working groups and teams that have
responsibility for overseeing and monitoring ESG- and climate-related issues, including for the FCA TCFD in-scopebusiness of each of the TCFD in-scope entities.
GROUP

RESPONSIBILITIESMEMBERSHIP STRUCTURE

Investment Management
ESG Committee

Oversees and guides MSIM’s support for the sustainable
investment strategies of each investment business.

Co-chaired by the MSIM Co-Head and Chief Investment
Officer of the Solutions & Multi-Asset Group and
MSIM’s Global Head of Risk & Analysis. Consists of senior
representatives from the MSIM Sustainability team andother advisory and related functions.

MSIM Sustainability Team

Supports MSIM’s collective sustainability-related
processes and governance. Works with the sustainability
leads from our investment teams to coordinate global
sustainable investing and stewardship initiatives.
Provides quarterly and ad hoc updates to the Investment
Management ESG Committee, and periodic updates torelevant boards as required.

A group of sustainability professionals with experience
across regulation, strategy and solutions, stewardship andtechnology & data, led the Global Head of Sustainability
for Investment Management.

Global Stewardship TeamThe Global Stewardship function, as part of the MSIM
Sustainability team, supports and helps investment teams
coordinate MSIM proxy voting and investee engagement
activities.

Stewardship analysts with experience across corporate
governance and proxy voting, led by the Global Head of
Stewardship.

MSIM Sustainability Leads

Work with their respective investment teams to help
encourage incorporation of ESG factors where relevant, inline with each team’s investment philosophy and strategy.

Many of MSIM’s investment teams or asset class platforms
have appointed at least one dedicated Sustainable
Investing/ESG specialist to co-ordinate and support thesustainable investing approaches for the relevant team.

ESG Technology
Working GroupDefines and develops technology expertise and ESG data
programmes to support client needs.

Technology leads led by the Head of Sustainability Data
and Technology.

Sustainability Data andTechnology Council

Supports business and client needs for ESG data
governance and technological controls for MSIM.

A group of senior cross-functional business leaders,
including the Global Head of Sustainability for MSIM andHead of Data and Analytics for MSIM, chaired by the Headof Sustainability Data and Technology for MSIM.

Investment Management
Risk Committee

Provides a regular forum for different functional groups to Led by the Chief Risk Officer for MSIM and appointed by
identify and discuss key risks and make recommendations
the Firm Risk Committee.
to senior managers on managing those risks, which may
include climate-related risks where appropriate.

Global Risk andAnalysis Team

Provides ongoing monitoring for emerging risks in themarket, including sustainability and climate-related risks,
where relevant. Provides periodic reporting on ESG risk to
Risk Committees, relevant boards and investment teams,
where relevant

Led by the MSIM Head of Risk Management who chairs
the Investment Management Risk Committee.

In addition to the MSIM groups in the table above, MSIM also benefits from involvement in relevant management-levelcommittees, working groups and teams at the Firm level (for example, the Global Sustainability Office).

CLIMATE REPORT 2023

5

MSIM adopts a decentralised approach to investment
management, with investment teams primarily responsible
for assessing and monitoring the issues expected to
impact the products being managed, including climaterelated issues, where relevant. Several management-level
operating committees and subcommittees across thedivision share responsibility for the governance of theInvestment Management business and strategy. Several
Risk Committees have delegated responsibilities from legal
entity boards across the MSIM division.
Sustainability-related issues, including climate risks andopportunities, may be considered by certain investment
teams alongside other risks in investment team-levelprocesses, as appropriate for each investment strategy.
Further information on how investment teams consider
ESG factors in their decision-making, where relevant, isdetailed in the Strategy section of this Climate Report.
MSIM management is informed and monitors sustainability
matters (including climate-related issues) on a regularbasis, as appropriate, including through the committees
and groups as set out in the table above.
One aspect of MSIM management’s role, per thecommittees described above, is to feed into workshops
and top-down sustainability risk analysis, to identify
climate-related physical and transition risks that are most
relevant to business activities. For example, MSIM’s GRA
team works closely with the Firm’s Global Sustainability
Office to design and develop long-term climate-related
scenarios as described in this Climate Report, to identify
and assess key climate-related risks and opportunities .
More detail on climate-related risks and opportunities
is included in the Risk Management section of thisClimate Report.

Remuneration
A primary objective in designing compensation
programmes for MSIM employees is to ensure thatcompensation incentives are aligned with our businessstrategy of driving performance and adding value forclients, shareholders and other Firm employees.
Further, the Firm has a Global Incentive Compensation
Discretion (“GICD”) Policy. The GICD Policy requires
and directs compensation managers to consider only
legitimate, business-related factors when exercising
discretion in determining incentive compensation. Suchfactors include adherence to Morgan Stanley’s corevalues, conduct, disciplinary actions in the current
performance year, risk management and risk outcomes.
The GICD Policy also requires and directs compensation
managers to escalate circumstances that may warrant
cancellation or clawback of previously awarded
compensation for further investigation. Compensation
managers are required to certify their compliance with
the GICD Policy in advance of exercising discretion in
determining incentive compensation, and Morgan Stanley’s
Human Resources coverage team works directly withcompensation managers to ensure that they understandtheir responsibilities.
Where required by regulation, such as the EU SFDR, 8
the UCITS Directive9 or MiFID II,10 MSIM’s local entities
have adopted remuneration policies to promote soundand effective risk management of sustainability risks,
including discouraging excessive risk-taking with respect
to sustainability risks. Risk is considered at every
stage of the compensation planning process, from theinitial determination of the bonus pool to individualcompensation decisions.

Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial
services sector.
9
Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions
relating to undertakings for collective investment in transferable securities.
10
Directive 2014/65/EU of the Parliament and of the Council of 15 May 2014 on markets in financial instruments and Regulation (EU) No. 600/2014 of theEuropean Parliament and of the Council of 15 May 2014 collectively known as MiFID II.
86

CLIMATE REPORT 2023

Strategy

MSIM evaluates the impact ofsustainability-related issues, including
climate risks and opportunities,
as appropriate to the businessand managed investments in an
ongoing effort to deliver long-termvalue for our clients while meetingchanging demands.

As a client-centric organisation, our approach is premised ondelivering investment and risk management solutions tailored
to a wide range of clients’ preferences, including sustainability
preferences, where relevant. MSIM investment teams act as
responsible long-term investors and our collective purpose indelivering long-term value for our clients therefore guides oursustainability business agenda, investment and stewardship
activities. We seek to deliver on this approach in threemain areas:

DELIVER GLOBAL DEPTH AND BREADTH IN SUSTAINABLE INVESTING
EXPERTISE: Within certain MSIM investment teams, there aredesignated sustainability specialists or individuals responsible
CLIMATE REPORT 2023

7

for particular aspects of sustainability. These specialists andindividuals are supported by the MSIM Sustainability Teamand other centralised resources.


OFFER CLIENTS A SPECTRUM OF FLEXIBLE AND INNOVATIVESUSTAINABLE INVESTING SOLUTIONS: Providing our clients withinvestment solutions across asset classes that seek
alignment with their return objectives alongside theirsustainability preferences, where relevant.


MAINTAIN HIGH STANDARDS OF GOVERNANCE AND STEWARDSHIP:

Effective management of stewardship and sustainability
issues is an important component of our business approach,which requires committed leadership, strategic focus andappropriate checks and balances to enable overall
accountability and transparency. To that end, we haveestablished governance systems, risk management andcontrols to support and advance sustainable investing andstewardship across our business activities, as explained inother sections of this Climate Report, particularly theGovernance and MSIM Engagement Framework sections.

Climate-Related Risks and Opportunities
In our ongoing strategic vision to deliver long-term value
to clients, we recognise the importance of identifying,understanding and managing climate-related risks andopportunities that may impact our business both: (i)directly; and, (ii) with respect to our role as an investment
manager, indirectly through our portfolio companies;
where this is in line with the disclosed objectives of our
products. GRA conducts central risk assessments acrossthe business, some of which are presented in this section.
Climate-related risks and opportunities are typically divided
into two categories through which they might have a material
impact on any of our portfolio companies or on MSIM.
TRANSITION RISKS AND OPPORTUNITIESThe financial impact associated with the consequences oftransitioning to a low-carbon economy. The response to climatechange will result in changes to society and the economy driven
by governments, industries and consumers as society adapts toclimate change and mitigates its causes. These changes present
transition risks and opportunities that may be linked to policy
constraints, resource restrictions, technology trends, market
demand and supply shifts.
PHYSICAL RISKS AND OPPORTUNITIESThe financial impact associated with extreme weather events(acute) and long-term changes in climate patterns (chronic).
Specifically, physical risks may impact investors in our products
through deterioration in valuation of investments caused bydisruption to operations or destruction of properties. Mitigating
risks associated with these impacts may also present opportunities
for portfolio companies and MSIM as a standalone entity.
8

CLIMATE REPORT 2023

CLIMATE-RELATED RISKSAs set out below, our largest exposure to climate riskarises indirectly from the physical and transition risks
affecting the companies and securities in which we invest.
These risks could affect companies and securities inmyriad ways, which ultimately may impact investors in
our products and MSIM through, for instance, changing
portfolio valuation. Additionally, we have identified
several climate risks which may impact MSIM’s TCFD inscope entities directly as corporate entities and indirectly
through investments held on behalf of clients overdifferent time horizons.
The climate-related risks and opportunities identified inthis Climate Report are broadly similar to the risks andopportunities identified in MSIM Ltd’s TCFD report of 2022,
as there have been no significant changes to MSIM’s risk andopportunity exposures over the course of the last year.
Time Horizons
The GRA team monitors emerging risks in the market and expects
climate-related risks and opportunities to typically impact overthe following time horizons:
0-2 years: Short term
2-10 years: Medium term
10+ years: Long term
However, investment teams may use their own interpretation
appropriate to their investment strategies across different asset
classes on the time horizons they expect climate-related risks
and opportunities to impact their products.
The Risk Management section of this report provides further
information on the process for identifying, monitoring andmanaging climate-related risks. This section focuses on the
climate-related risks and opportunities we expect to materially
impact our portfolio companies over the above-notedtime horizons.

Direct Risks for MSIM’s TCFD In-Scope Entities as Corporate Entities
RISK

DESCRIPTIONHORIZON

MSIM IMPACT

Transition(Reputation)

Associated with perception of responding inadequately
to climate challenges linked to our investment
products and operational impact

Short,
mediumterm

Decreased revenues as a result of clients not allocating
their capital with MSIM due to reputational loss

Transition(Policy
and Legal)

Associated with changes to sustainability-related legal
and regulatory requirements impacting our products
or other aspects of our investment business andoperations

Short,
mediumterm

The volume and scale of complex regulatory
obligations could increase compliance costs
and expenses

Physical(Acuteand Chronic)

Associated with the impact on our global facilities
due to weather events and long-term shifts inclimate patterns

Long term

Increased capital expenditure, decreased revenue andincreased costs due to impacts on MSIM’s operations

Indirect Risks Impacting Investments Held on Behalf of Clients
Transition and physical risks affecting the companies in which MSIM’s investment teams invest may have an indirect
impact on MSIM through lower assets under management as a result of potentially decreased security values. The levelof risk may vary across different investment teams or products.
PORTFOLIOCOMPANY IMPACTRISK

DESCRIPTIONHORIZON

MSIM IMPACT

Transition(Policy
and Legal)

Associated with changes to current climate-related law
and regulation impacting portfolio companies’ operations

Short,
medium term

Increased costs

Decreased
MSIM portfolio
valuation and AUM

Transition(Technology)

Associated with requirements to keep pace with techadvancements in identifying, assessing and managing
climate risks

Medium term

Increased costs, decreased
revenues, increased competition

Decreased
MSIM portfolio
valuation and AUM

Transition(Reputation)

Associated with perception of not responding
appropriately to climate challenges (e.g., greenwashing)

Short,
medium term

Decreased revenues

Decreased
MSIM portfolio
valuation and AUM

Transition(Market)

Associated with an unfavourable shift in clientdemand away from existing products and services aspreferences change

Short,
medium term

Decreased revenues

Decreased
MSIM portfolio
valuation and AUM

Physical(Acute)Associated with the impact on physical operations of
portfolio companies due to weather events or changes intemperatureLong term

Staff disruption, increased
damage, increased expenditure,
increased insurance costs

Decreased
MSIM portfolio
valuation and AUM

Physical(Chronic)

Associated with sustained long-term shifts in climate
patterns impacting operations

Long term

Increased capital expenditure,
decreased revenue,
increased costs

Decreased
MSIM portfolio
valuation and AUM

CLIMATE REPORT 2023

9

CLIMATE-RELATED OPPORTUNITIESThe transition to a lower-carbon economy may alsopresent opportunities for investment managers generally.
These opportunities could manifest directly, by growing
MSIM’s business through new products and services.
Additionally, opportunities may arise indirectly throughthe financial outperformance of companies and securities

that manage climate risk effectively. In this section, we
present some relevant potential opportunities, based on
the TCFD classifications.
We outline examples of some of the direct opportunities
that we expect may impact our business, as well as someindirect opportunities we expect may impact our clientsand investors in our products over different time horizons.

Direct Opportunities for MSIM ’s TCFD In-Scope Entities as Corporate Entities
OPPORTUNITYDESCRIPTIONHORIZON

POTENTIAL MSIM IMPACT

Products andServices

Developing products and sustainability services in response to
emerging evidence on sectors deemed likely to benefit fromclimate transition

Short,
medium term

Increased AUM, may also result in an improved
competitive position

Market/Client
DemandCapturing changing client preferences to demand for moresustainability- or climate-themed products

Short,
medium term

Increased AUM, may also result in an improved
competitive position and increased market share

Indirect Opportunities Impacting Investments Held on Behalf of Clients
OPPORTUNITYDESCRIPTIONHORIZON

EnergyEfficiency

Investing in companies that are supporting
energy efficiency initiatives

Short,
medium term

Technology

Investing in companies or sectors that might
benefit from technology breakthroughs (e.g.,cleaner energy sources)
Portfolio companies benefiting from incentives
provided by governments (e.g., technologies
cutting greenhouse gas emissions)
Investing in companies that are early movers on
climate issues, or using engagement practices toencourage portfolio companies to act

Medium term

Incentives
Reputation

Short,
medium term
Short,
medium term

MSIM PHYSICAL AND TRANSITION RISKAND OPPORTUNITY ASSESSMENT

In addition to the above assessment of potentiallyrelevant climate-related risks and opportunities for
MSIM, an initial risk assessment was performed in 2023
by GRA in collaboration with Morgan Stanley’s Global
Sustainability Office across each of the different types ofclimate risks and time horizons in order to help facilitate
the risk identification process and compare relative to

POTENTIAL PORTFOLIOCOMPANY IMPACT

Decreased portfolio company operating Increased MSIM portfolio
costs, potentially increasing theirvaluation and AUM
associated profits, which could impact
asset valuation and AUM
Increased portfolio company revenue, Increased MSIM portfolio
potentially leading to increased
valuations and AUM
company value and increased dividends
Increased portfolio company revenue
Increased MSIM portfolio
and potential diversification ofvaluations and AUM
financial assets
Increased portfolio company revenue
Increased MSIM portfolio
valuations and AUM

MSIM’s overall exposures. This analysis was used in theconstruction of the climate scenarios set out in thisClimate Report. This analysis is qualitative in nature andbased on MSIM’s exposures across a diversified portfolioof global equities, government bonds, corporate bonds,
real estate and commodities. This is a separate processfrom the quantitative assessment that is performed by
GRA11 and described in more detail in the Scenario Analysis
section of this Climate Report.

Physical Risks
TIME HORIZON

ACUTE

CHRONICPOTENTIAL
MSIM IMPACT

Transition Risks
POLICY AND LEGALTECHNOLOGYMARKET

REPUTATION

0-2 years: Short-term
2-10 years: Medium-term
10+ years: Long-term
Low Risk or Opportunity   
11

Medium Risk   

High Risk

The assessment is part of an independent risk process. It was not delivered to, nor actioned by, MSIM’s investment teams or the Boards during the reporting period.

10

CLIMATE REPORT 2023

Types of Climate Risks
PHYSICAL RISKS

Acute
Acute physical risks are primarily related to severe weather
events, including hurricanes, wildfires, windstorms, drought,
heat waves, and floods. In the short term, moderate rises in
global temperatures may marginally increase the frequency
and severity of these weather events, resulting in property
damage to areas not prepared for weather events ofthis scope.
The frequency of significant weather events may increase overtime, heightening the overall risk in the medium- and longterm time horizons.
Chronic
Chronic physical risks are related to longer-term shifts
in ecosystems, geographic characteristics, sea levels andbiodiversity. Over the short and medium term, there may berelatively low portfolio exposure to these chronic risks, as theissues are typically long term in nature.
MSIM expects the risk level to its portfolios to be moderate in
the long term, although it may be heightened if average global
temperatures increase faster than anticipated. The real estate
sector may face higher chronic risk relative to other sectors,
as companies are expected to increase investment in physicalinfrastructure to account for the changes in geography
and climate.
TRANSITION RISKS

Policy and Legal
While many governments are already setting emissions
reduction targets, there remain differing views acrosscountries regarding the best approach and timeline.
As a result, coordination on impactful climate action is
expected to be unlikely in the short-term, limiting theoverall policy and legal risk. Sectors that rely heavily on
fossil fuels, such as energy, utilities or materials, may
face relatively higher risk, as they are more likely to be
directly impacted by new climate policy and regulation.
However, policymakers are expected to face mountingpressure from severe weather events over time, increasing
the likelihood of a more coordinated global regulation ofemissions and carbon pricing. Policy and legal risk may
become progressively heightened over the medium- andlong-term time horizons as a result.

Technology
In the short term, new low-carbon technology is expected
to remain expensive in relation to existing technologies.
Until newer technologies become cost competitive,
there may be limited risk that existing technology or
infrastructure is replaced.
In the medium term, new technology may become
more cost competitive, creating a moderate risk thatexisting technology or infrastructure becomes obsolete.
Companies are expected to start investing broadly indeveloping new low-carbon technologies.
Over the long term, technologies are expected to shift
from traditional fossil fuels to low-carbon alternatives.
Companies that have not invested in updating theirtechnologies may face heightened risk from stranded
assets or asset write-downs.
MarketIn the short term, market risk is expected to be moderate,
as increased costs in raw materials due to inflation andgeopolitical risks may accelerate changes in consumer
preferences. Over time, fossil fuels are expected to
become more expensive, and companies that have no
viable alternative energy sources may face heightened risk
as they experience asset write-downs.
Reputation
In the short term, the reputation of companies may
be partially based on their progress toward emissions
reduction, but the overall risk is expected to be limited.
Progressively more emphasis may be placed on thisprogress over the medium and long term, heightening the
reputational risk to companies over these time horizons.

Deliver Global Depth and Breadth in
Sustainable Investing Expertise
MSIM’s investment teams incorporate the assessmentof material ESG risks and opportunities into investment
decision-making processes, as appropriate and consistent
with their fiduciary duties, and according to investment
teams’ particular investment strategies. Incorporation ofsuch ESG risks and opportunities may occur at various stagesof the investment lifecycle including due diligence andresearch, valuation, asset selection, portfolio construction,and ongoing engagement and investment monitoring.

CLIMATE REPORT 2023

11

MSIM’s investment teams seek to leverage suchassessment of ESG risks and opportunities, along withother relevant information, in a way that is aligned withthe specific investment philosophy, asset class, and time
horizon of a given strategy or product.

Offer Clients a Spectrum of Flexible andInnovative Sustainable Investing Solutions
MSIM believes that ESG factors can present investment
risks and opportunities. The effective incorporation ofmaterial sustainability issues (including climate risks andopportunities) into investment team decision-making
processes (where relevant and applicable), alongside otherrisks and opportunities, will therefore be crucial in delivering
long-term value on behalf of our clients and meeting theincreased demand for sustainable investing solutions.
In response to investor demand, we offer clients a wide
range of sustainable investing solutions across asset
classes in actively and passively managed vehicles that
seek to align with clients’ returns objectives, alongside
their sustainability preferences. These include productsthat may consider ESG factors at a security and/or
portfolio level, by deploying a variety of ESG tools
and investing approaches, including, without limitation,
minimum criteria for inclusion, exclusionary screens (e.g.
sector/norms-based/sovereign/environmental/social
controversies etc.), utilising proprietary quantitative andqualitative assessment processes, and intentional tilts
towards certain sustainability factors, and/or requiring athreshold allocation to certain thematic labelled/certified
securities,12 such as a focus on sustainable/thematic
outcomes and/or seek to achieve attractive financial
returns alongside positive environmental and/or social
impacts. We also strive to provide relevant quantifiable
metrics and reporting for our products and solutions,13 asdata availability and access improve over time.
Sustainability risk is embedded into product development andproduct governance processes (as appropriate), and there areenhanced processes in place for certain ESG/sustainabilitythemed products, including input, review and feedback from
the MSIM Sustainability team, Legal and Compliance, andother functional stakeholders as appropriate.

Assessing the Impact of Climate Change on
MSIM Investment Strategies
We have developed a range of tools and analytics toequip investment teams and our business segments toassess and quantify the impact of climate-related risks
and opportunities across the investment portfolio, where
relevant. Our investment teams may use these tools,
along with their independent approaches, where these are
relevant, to assess climate-related risks alongside otherrisks impacting their portfolios.
To assess, quantify and respond to the impact of climaterelated risks and opportunities, we continue to develop oursustainability data, tools and research capabilities. As noted
previously, our investment teams are responsible for andemploy a range of approaches to assess the materiality ofclimate risks and opportunities impacting portfolio companies,
where relevant. Our portfolio managers and investment
teams have access to active support from our centralised
MSIM Sustainability team, and other working groups andteams across the Firm.

Investment Team-Level Capabilities(Where Applicable):
We continue to enhance our ESG data portfolio analytics
tools and capabilities, enabling investment teams toquantify and assess the impact of climate-related risks
and opportunities on their products and portfolios, where
relevant. This allows teams to access data insights to
support their climate strategies investment approaches,
where relevant, and to respond to the needs of clients.
Approaches adopted by investment teams to assess,
respond to and report on climate-related risks andopportunities may include, but are not limited to:14


Material risk indicator tools, which capture the portfolio
managers’ company sustainability assessments andexplicitly integrates material ESG factors into investment
decision-making processes and portfolio construction;
Qualitative reviews to assess portfolio companies’
climate resiliency, transition and adaption strategies
including analysis of reputation risks, potential litigation
and associated exposures;

Examples include green bonds or climate bonds (the latter of which can be issued according to the Climate Bonds Standard & Certification Scheme.
Including products’ sustainable features and information and data required for regulatory disclosures, where relevant.
14
Please note that some investment teams do not use these approaches, for example, where it is not currently feasible or appropriate to do so, e.g. passive
investment strategies, certain asset allocation strategies, or if not in line with the specific research and portfolio construction, philosophy and process usedby each team, or client requests.
12
13

12

CLIMATE REPORT 2023









Engagement policies and approaches. For example, one
engagement programme was adopted by an investment
team to identify holdings that have yet to release carbon
targets to drive future engagement opportunities;
Proprietary tools and frameworks to measure and track
the carbon footprint and intensity of investments;
Analysis of internal analytics dashboard, which
provides access to sustainability data, including metrics
on climate risks;
Investment team-level scenario analysis to assess
the resilience of strategies under a range of climatechange scenarios.

We recognise that the impact of sustainability factors on
our investments and assets and the tools and best practices
for assessing those impacts are rapidly evolving. We haveseveral processes in place designed to ensure that we are
well positioned as a business to address climate-related risks
and opportunities related to our investment management
activities as appropriate, including:Further information on how our investment teams incorporate
climate-related risks and opportunities into certain strategies
can be found in relevant product-level disclosures.

MSIM Centralised Support Functions
We recognise that the potential positive and/or negative
impacts of ESG factors on the economy and ourinvestments are rapidly evolving. Processes at the MSIM
level to assess the impact of these sustainability factors
include, but are not limited to:

Independent Scenario analysis capabilities run by MSIMGRA (further detail can be found in the Scenario Analysis
section of this Climate Report).
Periodic assessments conducted by MSIM GRA toassess and quantify the relative severity of different risk
types within the MSIM risk inventory. The Risk
Management section describes in more detail how
sustainable investing risks, including climate-related risks,
are embedded into the MSIM risk management
framework and therefore are assessed against otherrisks, as appropriate. For public market portfolios, theteam conducts periodic position screenings to quantify
MSIM’s exposure to potential risks, and it also develops
market-driven downside scenarios to seek to ensure thatchanging market conditions are taken into account. For
private markets, ESG risks or opportunities may be raisedas part of the relevant Investment Committee process
and evaluated in coordination with Morgan Stanley’s
ESRM group.15



Ongoing monitoring and tracking of global ESG legal andregulatory developments by the MSIM Sustainability
team and the Compliance department, which supports
MSIM’s compliance with these requirements.
Internal assurance processes that assess compliancewith ESG external laws and regulations and ongoingwork with MSIM Legal and Compliance and various
external consultants to monitor the legal and regulatory
landscape and prepare road maps for disclosures, as wellas continual improvement.
Ongoing training: topical training and knowledge-sharing
is provided periodically to investment teams and relevant
stakeholders on global sustainability regulations andframeworks, client ESG/stewardship requirements andinterests, sustainable investing and engagement trends
and best practices, and mitigation of greenwashing risks.

MSIM Engagement Framework
As active investors and active owners, we have a duty to
be good stewards of our clients’ capital. We seek to fulfil
this duty by engaging with selected companies in which weinvest, and by exercising our proxy voting and other rights
as shareholders. These stewardship activities give us theopportunity to help guide companies in which we invest
toward better ESG practices, which we believe could
contribute to attractive returns for our clients over thelong term.
Stewardship and engagement efforts at MSIM are led byinvestment teams with engagement objectives prioritised
depending on asset class, geography, investment styleand strategy.
Although MSIM does not have centralised investment
beliefs across asset classes and strategies, there are

The Firm’s Environmental and Social Risk Management Group (“ESRM”) provides internal subject matter expertise to MSIM’s private markets teams on
environmental and social risk, conducts due diligence on relevant transactions, engages with stakeholders, and monitors emerging risks and developments inpartnership with the Firm’s business units, Global Sustainability Office and other relevant control functions.
15

CLIMATE REPORT 202313

certain parallels in the chosen approach to engagement
across our various investment teams which reflect our
determination to provide long-term value to our clients.
Certain investment teams may work with the MSIM Global
Stewardship team to use their broader industry knowledge
to identify key prioritisation areas.
We believe engagement — ​when effective — ​is mutually
beneficial as it enables companies/issuers to explain
how their approach to sustainability relates to theirbroader business strategy and also allows investors towork closely with companies/issuers on specific ESG
issues which they believe pose a downside risk and /or
opportunity to the business. To that end, when we identify
financially material ESG-related or other issues impacting
companies/issuers in which we hold significant positions,
we seek to proactively engage in active dialogue withmanagement and the results of such interactions in turninform our investment processes.
Engagements are prioritised based on a variety offactors including position size, cadence of annual general
meetings, headline events, and materiality of engagement
topics. Engagement objectives also differ based onthese factors, and can range from information gathering,
to encouraging specific disclosures and improved
sustainability and governance practices such as adopting
longer-term vesting schedules or adopting science-basedcarbon reduction targets, where appropriate.
Investment teams also monitor and engage withcompanies/issuers in the normal course of theirinvestment process and leverage the support of the
Global Stewardship team, where needed.
In our private equity business, members of the investment
team may serve on the board of directors or invest with

16

other external managers. We believe that engagement
fosters productive dialogue, focusing on sustainability risk
management and value-generation opportunities.
MSIM has identified five common themes which certainof our investment teams focus on in their engagements,
based on respective strategies, where relevant andappropriate.16 These five MSIM engagement themes webelieve are aligned with the United Nations Sustainable
Development Goals, which are areas that may cause risk toour society and well−being, global economy and/or capital
markets, but may also present opportunities for improved
sustainable and/or financial outcomes.
The investment teams responsible for MSIM’s actively
managed investment solutions generally find one-to-one
discussions to be an effective way to articulate views
to companies/issuers. However, we are supportive ofcollaborative engagement where it could be necessary or
useful to materially enhance portfolio value and where
we can do so in a manner that is in full compliance withapplicable laws and regulations. These collaborative
engagements may include collaboration with industry
peers and standard-setting organizations, and engagementin public policy development in ways that seek toadvance sustainable investing practices. Factors that we
consider before participating in collaborative actions
may include, but are not limited to: potential conflicts ofinterest, our obligations under competition or antitrust
laws, materiality of the issue and potential for delivering
tangible outcomes in relation to key sustainability or
stewardship-related issues. Notwithstanding the adopted
mode of collaboration, we approach collaborative
engagement from the perspective of our role as fiduciaries
of client assets, acting on behalf of and in the best interestof our clients.

In 2023, Natural Capital & Biodiversity was included as an additional engagement theme for MSIM.

14

CLIMATE REPORT 2023

MSIM Engaging Companies Themes
Supporting the transition to a
low-carbon economy in line with Paris
Agreement goals

Renewable energy and clean tech
Energy efficiency
 Physical impact adaptation


DECARBONISATION &CLIMATE RISK

Supporting business practices thatcreate a more just and inclusive society

DIVERSE &INCLUSIVE BUSINESSSupporting business models
that reduce negative impact on
biodiversity in line with the Post 2020
Biodiversity Framework
NATIONAL CAPITAL& BIODIVERSITY

Supporting business models that
reduce impact on natural resources
and that innovate to reduce
waste generation, with a focus onplastic waste

Affordable access toessential services
 Investing in communities
 Racial justice Pay equity
 Board/employee diversity


Sustainable sourcing and useof resources Land and sea use change Deforestation
 Pollution reduction


Recycling and reuse
Sustainable sourcing
 Lifecycle analysis
 Water stewardshipCIRCULAR ECONOMY& WASTE REDUCTION

Supporting decent work acrossthe entire value chain and making
workforces resilient in the face ofinnovation and change

Automation and the workforce
Supply chain management
 Living wage
 Workforce well-being


DECENT WORK& RESILIENT JOBS

Investment teams may also engage on other areas not limited to these five themes. MSIM regonises that the UN Sustainable Development Goals (SDGs) were written by
Governments for Governments and therefore engagement themes with corporates and the SDGs may not be perfectly aligned. The content of this publication has not been
approved by the United Nations and does not reflect the view of the United Nations or its officials or Member States. See https://www.un.org/sustainabledevelopment/sustainable-development-goals for more details on the Sustainable Development Goals.

CLIMATE REPORT 2023

15

Scenario Analysis Overview
Climate-related scenario analysis involves the use ofmodelling techniques to assess the potential exposureof investment portfolios to climate-related risks andopportunities based on projecting variables according tochosen future uncertain scenarios. Climate scenarios area set of plausible futures for the operating context of thebusiness, and are not predictions about any single “mostlikely” future. MSIM has scenario analysis capabilities
across different layers of the business performed at
the Firm, MSIM and product level, as part of our risk
management function, which is independent from theinvestment teams.17
GRA performs scenario analysis to help assess thepotential impact of climate-related risks and opportunities
on investments, and to identify vulnerabilities over theassessed time horizon from a risk perspective. Specifically,
GRA has the capability to conduct forward-looking
scenario analysis to centrally monitor climate risk ofcertain portfolios across different asset classes in order tomeasure the financial impact of climate change. Currently,
and with respect to the reporting period, the strength of
GRA’s capabilities is in quantifying the potential impact oftransition risks and opportunities on our public portfolios.
A number of short-, medium- and long-term physical risks
have been identified that could impact our aggregatedinvestment portfolio as noted previously. However, we
do not currently incorporate these risks into scenario
analysis processes. It is up to investment teams to choose
whether and how to assess the physical risk exposure to
their portfolios. Some investments may do this, whileothers may not, depending on the financial products andthe team’s ESG approach. We are seeking to advanceour physical risk methodologies to assess and monitor
exposure. Firm Risk Management continues to work with
the Global Sustainability Office to advance physical risk
methodologies and proprietary modelling capabilities overtime to provide a consolidated view.

Results are shared with investment teams and monitored
for changes over time by GRA to ensure that climaterelated risks are being appropriately identified, tracked
and managed.

Climate Scenario Analysis Methodology
The Firm has developed long-term climate scenario
narratives focusing on several proprietary scenariosand simulated impacts on numerous macroeconomic
indicators out to 2050. GRA has used three scenarios thatare aligned to narratives by the Network for Greening
the Financial System (“NGFS”). These scenarios havebeen applied to the quantitative analysis performed over
several, but not all, of MSIM products. This has beendeveloped and delivered independently of the investment
teams. The scenarios are reflected below:
These scenario outputs have been derived from asuite of models comprising an Integrated Assessment
Model, which is a recommended technique by certain
industry standard bodies, as well as macroeconomic andindustrial models.
The Integrated Assessment Model is then linked to moregranular models to generate macro-financial and sector
outputs across the different scenarios. These outputs
include market variables, commodity prices, regional GDP,
sector revenues and others. These outputs are used by
GRA as inputs for quantifying the market shocks. These
shocks are then constructed in risk management systems
in order to calculate the stress Profit and Loss returns at
the product and benchmark levels.
GRA uses these scenarios and runs product-levelassessments for products across the business. Centrally,
the team assesses prospective portfolio returns andcompares them to market benchmarks to seek to identify
any potential areas to investigate further.

For more information on the Firm analysis, see the Morgan Stanley Firm-level ESG disclosures. More information on the product-level scenario analysis
processes will be provided in the TCFD product reports, available on-demand to those entitled to receive such information.
17

16

CLIMATE REPORT 2023

Scenario Narratives
NET ZERO WORLDNet Zero world narrative (“orderly transition”) — ​Increased international collaboration and technological advancement results in the
globe being on track to limit global warming to 1.5-2 degrees Celsius.
In this scenario, global total CO2 emissions continue to decline, hitting net-zero by 2050. Global temperature rise is limited to 1.5°C
to 2.0°C through immediate climate action with global coordination across policymakers. The policy includes a global carbon tax,
and a thriving sustainable finance market fuels significant investment in clean energy. Most notably, the economy benefits from new
innovations in clean technology, carbon capture and energy efficiency. Sectors such as transport and power experience significant
decarbonisation. Real estate construction booms as buildings are renovated or replaced with more climate-resilient and efficient tech.
Consumers also help to accelerate the transition with higher demand for low-carbon products.

POLARISED CLIMATE PROGRESS
Polarised climate progress narrative (“disorderly transition”) — Global fragmentation of financial markets due to global successagainst net-zero targets being hampered by division and ulterior motives.
In this scenario, global total CO2 emissions are reduced gradually, but net-zero targets are not achieved by 2050. Global temperaturerise is limited to 2°C to 2.5°C through fragmented climate action lacking coordination globally. Countries and businesses choose tofocus on self-reliance and protectionism to mitigate risks from climate, pandemics and geopolitical disruption. There is a significant
divergence in carbon prices globally as a result. Economies are localised with GDP and population growth rates varying by region.
Income gaps also continue to widen. While there are domestic investments in clean technology and infrastructure, this progress is also
accompanied by green tech export restrictions. This situation further exacerbates the significant difference in clean technology andcosts by region. While there are some ambitious and meaningful climate efforts, global success is ultimately hampered by division andmisalignment between countries.

PRIORITISING RECOVERY, NOT CLIMATE
Prioritising recovery (“hothouse world”) — Focus on growth results in a shift away from curtailing emissions with climate regulations
being relaxed, leading to significant physical and economic impacts due to climate change.
In this scenario, policymakers take insufficient climate action to reduce global total CO2 emissions. Instead, they prioritise economic
growth, and global temperature rise climbs to 3°C to 4°C. There are country-specific carbon prices, and low tariffs/trade barriers
are in place in order to promote global commerce. There is heightened investment in technology, and money continues to flow into
traditional fossil fuel exploration and production industries as well. Economic growth is high in the short term as a result, but withpotentially higher costs in the medium- to long-term time horizons.

Climate Scenario Analysis Output
The scenario narratives described above seek to enable
impacts to be simulated across a number of indicators out
to 2050. However, the current focus of the GRA team is toquantify impacts over short-term time horizons that alignto the relevant decision points of underlying investments.
Typically, GRA looks at its exposures across asset classes,
sectors and industries in order to understand how changes
in the macroeconomic environment may impact them. Thisdata is inputted into existing proprietary impact models
to ascertain potential impact to the underlying securities,

and the potential impact to MSIM in terms of components
such as portfolio value.
To enhance our analysis of the material climate risks andopportunities linked to transitioning to a low-carbon
economy, GRA has conducted an assessment, based onholdings as at the end of the reporting period, covering
products within our FCA TCFD in-scope business. We
performed analysis across a number of climate-related
metrics that assess portfolio companies’ climate impact
and readiness for transition and exposure to shocks acrossdifferent sectors.

CLIMATE REPORT 2023

17

The below heatmap illustrates a summary of the sectorlevel outputs from this transition risk and opportunity
assessment, through simulating impacts over a short-termhorizon. However, the assessment does not incorporate
the full spectrum of potential damage from physical risk.
For example, while the heatmap highlights the projectedmarket impact in the “prioritising recovery, not climate”
scenario, we would also expect further detrimental
climate impact in this outcome, which is not reflected in
the graphic.
While MSIM has a diverse portfolio with product-level
exposure to most sectors, the following sectors andindustries are featured in the below heatmap, as we

believe they may face heightened risks or opportunities
based on the modelling of these specific climate scenarios.
The outperformance or underperformance of a given
sector or industry may ultimately have an impact on thevaluation of assets that MSIM manages.
This climate scenario analysis has been undertaken by the
GRA team during the reporting period using appropriate
data. The results of this climate scenario analysis arebroadly consistent with the results of the climate scenario
analysis reported in the 2022 Climate Report, given
there have been no significant changes to the risks andopportunities presented by the below sectors/industries
during the past year.

Sector and Industry Risks and Opportunity Heatmap

SECTOR/INDUSTRYNET ZEROWORLD

POLARISEDCLIMATEPROGRESSPRIORITISINGRECOVERY,NOT CLIMATESECTOR/INDUSTRY

Consumer
Discretionary

Information
Technology

Consumer Staples

Real Estate

EnergyCommunication
Services

Materials

Utilities

Industrials

Renewables

Healthcare

Transportation

Financials

Low Risk or Opportunity   

18

CLIMATE REPORT 2023

Medium Risk   

High Risk

NET ZEROWORLD

POLARISEDCLIMATEPROGRESSPRIORITISINGRECOVERY,NOT CLIMATENet Zero WorldIMPACT OF TRANSITION SUMMARY

In the short term, rising carbon prices may drive moderateincreases in inflation and unemployment. This is expected
to result in a mild economic contraction before returning
to prior trends in the medium term. There may also besome dislocations across sectors in the short term, ascompanies adjust to changing consumer preferencesand declining demand for fossil fuels. Over the longterm, the global economy is expected to benefit fromthe new technology innovations spurring positive longterm growth.
ENERGY SECTOR

Sectors and companies that are carbon intensive but have
not yet started to transition to reduce their emissions may
be at heightened risk in this scenario. As such, traditional
oil and gas companies may be particularly vulnerable tochanging patterns in energy consumption, higher prices
from carbon legislation, or losses from stranded assets. A
material demand for decarbonisation technologies could
benefit companies that invest in adjacent carbon reductionor alternative fuel assets.
FINANCIALS SECTOR

The financials sector is expected to play a key role infacilitating the reduction in emissions through lending,insurance underwriting, asset management or trading
activities with energy and clean tech companies. As
a result, it may face relatively low transition risk, andfinancial services companies may in fact benefit fromnew opportunities from the heightened investment inclimate solutions.
MATERIALS SECTOR

As carbon prices are expected to increase in the Net ZeroWorld scenario, the materials sector may face heightenedtransition risk. A sizeable proportion of companies in thisspace continue to rely heavily on fossil fuels and may be
impacted by higher costs.

UTILITIES SECTOR

The successful path to net-zero is expected to require
the decarbonisation of the utilities sector. Gas utility
companies may struggle to adjust, as they are faced withhigher costs of emissions and the challenges of maintaining
a fixed rate base given shrinking demand. Overall, thesector is expected to face heightened risk in the shortterm as it transitions to lower demand for gas utilities andhigher demand for electric utilities. Over time, investments
in new technologies and changes in the power grid may
present new opportunities for utilities companies.
INFORMATION TECHNOLOGY SECTOR

The information technology sector is expected tobenefit from significant investments in this space. New
technological innovations may help to drive economic
growth during the transition to a Net Zero World.
REAL ESTATE SECTOR

In the Net Zero World scenario, a boom of construction
activity is expected in order to build more climate-resilient
properties and also modernise existing buildings with thenewest efficient technologies. This immediate investment
across the sector may help to mitigate physical climate
risks over time.
RENEWABLES INDUSTRY

In this scenario, significant investments are expectedacross the renewable energy market to support thechanging global energy mix. Existing and new companies inthe space may benefit from these opportunities along withthe rapid development of renewable energy technology.
TRANSPORTATION INDUSTRY

Transportation is expected to play a key role in the netzero transition, as significant investment is made in electricvehicles and infrastructure as part of the decarbonisation
effort. While there may be some headwinds from higher
carbon prices and changing consumer preferences,companies may benefit from technological innovations
and the flurry of new money moving to this space. Modal
shifts may be more significant given the challenges ofdecarbonising certain forms of transportation.

CLIMATE REPORT 2023

19

Polarised Climate Progress
IMPACT OF TRANSITION — ​SUMMARY

In the short term, there is a moderate decrease ineconomic growth; however, the impact is more muted
than in the Net Zero World scenario. Likewise, there arealso some dislocations across sectors in the short term,
but they are less pronounced in this scenario, as the rateof change in demand for fossil fuels is not as rapid. Overthe medium term, prior trends in growth resume, and theglobal economy experiences some moderate benefits fromclimate action and technological progress.
ENERGY SECTOR

Sectors and companies that are carbon intensive but have
not yet started to transition to reduce their emissions
may be at heightened risk. As such, traditional oil andgas companies may face losses from changing patterns
in energy consumption, higher prices from carbon
legislation, or losses from stranded assets. Demand for
decarbonisation technologies could benefit companies
that invest in adjacent carbon reduction or alternativefuel assets, but government support is still required ininitial stages.
FINANCIALS SECTOR

The financials sector may not experience as muchopportunity as in the Net Zero World scenario, as overall
lending activity and investment in new climate solutions
is lower. However, the sector is not expected to faceheightened risk in this scenario.
MATERIALS SECTOR

The materials sector may face heightened risk in this
scenario, as a sizeable proportion of companies continue
to rely heavily on fossil fuels. With carbon prices expected
to be higher regionally, these companies could be subject
to headwinds from increased costs during the transition.

20

CLIMATE REPORT 2023

REAL ESTATE SECTOR

In the polarised climate scenario, the real estate sector
may not experience as much opportunity as in the Net
Zero World scenario, as overall investment in building
new green properties and modernising existing properties
is lower. However, the sector is not expected to faceheightened risk either.
INFORMATION TECHNOLOGY SECTOR

The information technology sector may benefit frominvestments in the space. New technological innovations
are expected to help to drive economic growth in
this scenario.
UTILITIES SECTOR

Efforts to decarbonise utilities may heighten risk for this
sector. The speed of decarbonisation may vary acrosscompanies based on differing regulatory frameworks.
During the transition, companies are expected to faceheadwinds from lower demand for gas utilities andhigher demand for electric utilities over time. Gas utility
companies may also face higher costs of emissions and thechallenges of maintaining a fixed rate base given shrinking
demand regionally. Over time, the sector will begin
to experience some benefits from investments in newtechnologies and the changing power grid.
RENEWABLES INDUSTRY

New investments are expected in the renewableenergy market to support the changing global energy
mix. Companies in the space may benefit from theseopportunities along with the development of new
renewable energy technology.
TRANSPORTATION INDUSTRY

The transportation industry may benefit from newinvestments in electric vehicles and infrastructure as partof the decarbonisation effort. These benefits may beuneven according to regional incentive schemes. While
there may be some headwinds from higher carbon prices
and changing consumer preferences, companies are
expected to benefit over time.

Prioritising Recovery, Not Climate
IMPACT OF TRANSITION SUMMARY

In the short term, there is an increase in the economic
growth rate, as policymakers focus only on the market
recovery from COVID-19. Technology is the primary driverof the economy, and money continues to flow into this
sector. Carbon prices remain relatively low, so there arefewer dislocations across sectors compared to the otherscenarios. Over time, the global economy continues tooutperform based on the growth-above-all approach ofpolicymakers. As mentioned, this assessment does notincorporate the full spectrum of potential damages fromphysical risk.
ENERGY SECTOR

The energy sector is not expected to face heightenedtransition risk in the “prioritising recovery, not climate”
scenario. Money will continue to be invested in the
exploration and production activities of traditional oil andgas companies.

investments may continue to flow into the space withtechnological developments fueling higher productivity.
UTILITIES SECTOR

The utilities sector is not expected to face heightenedtransition risk in this scenario, as the transition from gas toelectric utilities may be slow-moving. Carbon prices may
also continue to remain relatively low. Rate affordability
may be strained by reliance on legacy fossil assets.
RENEWABLES INDUSTRY

Although money may continue to flow into traditional oil
and gas exploration and production companies, moderate
investment in renewable energy is also expected in this
scenario. The pace of development for new renewableenergy technology will not be as fast as in the other two
scenarios, but the industry may still be a driver of growth
as companies focus on climate adaptation.
REAL ESTATE SECTOR

While real estate may benefit from the higher growth
rates in this scenario over the short term, the sector is
expected to face heightened physical risks from the lack ofclimate action in the long term.
TRANSPORTATION INDUSTRY

The materials sector is not expected to face heightenedrisk in this scenario, as companies may continue to benefit
from relatively low carbon prices.

The transportation industry is not expected to experience
the same benefits from new investments in electricvehicles and infrastructure as in the other two scenarios.
Companies, which are laggards in the energy transition,
may be given a chance to catch up.

FINANCIALS SECTOR

TAKEAWAYS FROM MSIM CLIMATE SCENARIO ANALYSISAs policymakers continue to focus on economic growth, thefinancial sector is expected to face limited risk in this scenario.

Climate scenario analysis will continue to inform our risk
measurement and management processes. We continue
to seek opportunities to enhance our scenario analysis
capabilities in the future, where methodologies anddata allow.

MATERIALS SECTORINFORMATION TECHNOLOGY SECTOR

The information technology sector is expected to play a
key role in driving economic growth in this scenario. New

CLIMATE REPORT 2023

21

Risk
Management

Risk is an inherent part of MSIM’s investment
management business. MSIM believes thatclimate-related risks can be financially material
to the assets we manage and ultimately to ourbusiness. To act in the best interests of ourclients, MSIM seeks to implement effective risk
management practices that incorporate climaterelated risks, as appropriate.
Structure of Risk Management
MSIM has a Global Investment Management Risk
Management Policy, and a Risk Committee that is

22

responsible for supervision of its risk exposures and risk
processes. Periodic risk updates are presented to theboards of the TCFD in-scope entities by the GRA team,as required. These provide information on the level ofrisk within the funds, details of oversight activities, aswell as noting any breaches of internal or regulatory
limits, including adherence to sustainability-related fundobjectives and (where relevant) climate-related issues.
MSIM’s processes for identifying, assessing and managing
climate-related risks are integrated into MSIM’s existingoverall risk management framework, which is based on a“three lines of defence” model; please refer to the diagram
below which demonstrates this model.

1st Line

2nd Line

3rd Line

Investment teams, the MSIM riskfunction (“Global Risk and Analysis”)
and various other control and oversightfunctions form the first line wheremost risks are identified

Morgan Stanley Firm Risk
Management and MSIM
Compliance form the secondline providing independent
monitoring of risks

Morgan Stanley Internal
audit performing a rangeof assurance activities inline with risk exposure

CLIMATE REPORT 2023

Risk Appetite
All TCFD in-scope entities produce a Risk Appetite
Statement in relation to the MSIM business(reviewed and approved on an annual basis) that
articulates the aggregate level and types of principal riskthat the legal entities are willing to accept to achieve
strategic objectives consistent with the business segment
and wider Firm strategy, as well as applicable capital,
liquidity and other requirements.
At MSIM, we continue to believe that climate changerelated transition and physical risks are key risks.
Sustainable investing risk, which includes climate changerelated transition and physical risks, is one of the principal
risk categories monitored under our Global Investment
Management Risk Management Policy. Principal risks areformalised risk categories managed in a manner consistent
with the framework established under this policy.

The risk committees across MSIM oversee, address andprioritise risks, including climate risks, taking into accountthe MSIM Risk Appetite Statement, as well as emerging
regulatory and external events. MSIM has implemented
systems, controls and procedures to identify, track andultimately manage climate-related risks at security,
portfolio and entity level. Our investment teams are
the primary risk owners, and identify these risks andmanage them, together with other risks, as part of theirinvestment process.

Risk Management Life Cycle
MSIM’s Risk Management Framework outlines thestandards, guidelines, and procedures implemented by
MSIM to proactively identify, assess, monitor and manage
risks on behalf of our clients and across the business in an
objective, transparent and systematic manner.

MSIM GLOBAL INVESTMENT MANAGEMENT RISK FRAMEWORK

Risk Identification and Assessment
Risks are identified, quantified and evaluated within the MSIM
Risk Identification Framework Although most risks are identified at the business segment levelby investment teams, GRA maintains and monitors the risk
inventory of all risks stemming from MSIM activities
 Investment teams are responsible for assessing risks impacting
their respective portfolios with GRA conducting materiality
assessments to evaluate the relative significance of risks
 Climate is embedded within sustainable investing risk, which isdefined as a principal risk


Risk Identification
Risk identification and the effective quantification andassessment of material risks are critical to the risk
management framework at MSIM. On a quarterly basis,senior management of MSIM, in coordination with therelevant Risk Management and Finance teams, review
the established risk inventory and assess emerging risks.
Within this process, sustainable investing risk is classified
as a principal risk and defined as the risk stemming fromclimate change transition and physical risks; natural
resource depletion; waste intensity; labor retention,
turnover and unrest; supply chain disruption; corruption
and fraud; and human rights violations.

Risk Monitoring and Management
Investment teams work with other first line functions (e.g.,
the MSIM Sustainability Team) to mitigate and manage risks
associated with their respective strategies
 MSIM Risk Management supports several key committees,
including the MSIM Risk Committee and EMEA MSIM
Risk Committee, to perform independent monitoring andensure the effectiveness and consistency in approach acrossall risk categories


Investment teams, along with support, control andoversight teams within the first line of defence, monitor
and assess climate risks, which may materially impact
investment portfolios, as appropriate. Certain investment
teams have their own approaches and proprietary
frameworks for identifying and assessing climate risks
as appropriate to their investment styles and the asset
classes they cover. Additionally, material climate-relatedrisks may be incorporated into team research processes
and assessed alongside other material risks as appropriate
to the financial product.
The MSIM Risk function, GRA, is led by the MSIM Global
Head of Risk and Analysis, who chairs the Investment

CLIMATE REPORT 2023

23

Management Risk Committee. This committee provides aregular forum for representatives of different functionalgroups to identify and discuss key risk issues and makerecommendations to senior managers.
The MSIM and Firm Risk committees oversee and assess
risks that are escalated from the business and control
functions. The relevant MSIM entity boards provide
oversight and challenge on a number of market-wide andsystemic risks, from a legal entity perspective, which areassessed and monitored by committees across the division.
As noted previously, MSIM categorises climate change
as a key systemic risk, and several workshops havebeen conducted with representatives across the wider
Morgan Stanley business lines to identify, measure andassess future climate risks according to business activities.
Our climate risk identification processes continue to evolvein line with external developments, with GRA and Global
Sustainability Office working in close collaboration with
the Environmental and Social Risk Management Groupto consider emerging climate risks and ensure our risk
registers are updated as needed.

Risk Assessment
Climate change is embedded into the wider risk frameworkand investment teams’ existing monitoring and exposure
analysis processes at MSIM, where relevant. To monitor,
assess and measure climate-related risks across the assetsthat we manage, we continue to develop our scenario
analysis capabilities in assessing our exposure to transitionand physical risk over different time horizons.
Along with the investment team-level processes we referto below, for public markets portfolios, the GRA teamconducts top-down sustainability risk analysis to monitor
and measure exposure to key risks relative to regulatory
rules, prescribed risk limits and any defined benchmarks.

24

CLIMATE REPORT 2023

As described in the Strategy section, we conduct climaterelated scenario analysis to test vulnerabilities, assess
exposure to transition risks, and measure the potential
financial impact. Research is performed on emerging
climate-related risks and topical ESG issues to ensure that
our scenarios remain appropriate.
In addition to the above-mentioned product-level analysis,
GRA has conducted a qualitative assessment covering a
subset of the investment portfolio to evaluate and identify
the sectors that may be more exposed to climate shocks,
which is described in more detail in the strategy section.
A number of short-, medium- and long-term physical risks
have been identified that could impact our aggregatedinvestment portfolio, as detailed previously. However,
we do not currently incorporate these risks into scenario
analysis processes. We consider investment teams to be
best placed to assess the physical risk exposure of theirportfolios since they engage with portfolio companies
regularly. We are seeking to advance our physicalrisk methodologies to assess and monitor exposure.
Firm Risk Management continues to work with the
Global Sustainability Office to advance physical risk
methodologies and proprietary modelling capabilities overtime to provide a consolidated view.
Risk Timeframes
Transition and physical risks can develop and materialise overdifferent time horizons compared to traditional risk types. As
described in more detail in the Strategy section, our investment
teams adopt approaches to incorporating climate transitionand physical risks into decision-making processes, and will havetheir own interpretations on the time horizons associated withthese risks.
Centrally, GRA assesses and monitors risks within the context
of the following timeframes: 0-2 years, short term; 2-10 years,
medium term; 10+ years, long term. We have defined each of
the key climate-related risks detailing the time horizon against
which they are being assessed in the Strategy section.

Climate Risk Management
INVESTMENT TEAM LEVEL

Climate-related risks may be considered by the investment
teams and integrated into decision-making within portfolio
strategies, as relevant to the financial product. Ourinvestment teams are informed by and derive insights fromwider Firm functions, such as the MSIM Sustainability team,and adopt their own risk management approaches.
To manage climate-related risks, a number of proprietary
tools and screening frameworks have been developed acrossinvestment teams to support the understanding of climaterelated risks and opportunities where appropriate. The scopeof our strategies to integrate climate considerations is guided
by mandates agreed with clients and the investment policies
of our products. Our investment teams integrate material
climate considerations into decision-making, given the longterm impact on portfolio companies, where relevant.
Examples of investment team climate risk management
approaches adopted include, where relevant:Proprietary exclusion frameworks



Tilting away from carbon-intensive sectors



Product-level decarbonisation targets

Incorporation of material climate risks and opportunities
in research processes, including through the use of
proprietary “ESG scorecards” and evaluation frameworks
to assess exposure to climate risks

BUSINESS AND CONTROL FUNCTION OVERSIGHT

GRA conducts top-down sustainability investment
risk analysis, including assessment of sustainability risk
exposures, controversial business exposures and thepotential impact of different climate change and transition
risk scenarios. Where relevant, certain products haveenhanced controls and processes to monitor that they
are being managed in line with their stated sustainability
characteristics.
To facilitate and oversee management of climate-relatedrisks, ESG risk updates are reported into the quarterly
Investment Management EMEA Risk Committee in thesame manner as other risks. This committee is attended byvarious functional stakeholders across investment teams
and support functions, and provides guidance on the
management of risks, including sustainable investing risks,
where relevant.
In addition to the above noted formal discussions, GRA
may engage directly with portfolio managers acrosscertain investment teams at MSIM on climate risks, where
relevant, enabling oversight and challenge of activities.
There is also ongoing dialogue between Morgan Stanley’s
Environmental and Social Risk Management Group,
Morgan Stanley business segments, including MSIM, andGlobal Sustainability Office, to address key risks and issues
that may pose a reputational risk to the Firm.

Climate-themed engagement programmes

CLIMATE REPORT 2023

25

Metrics
and Targets

Metrics
MSIM uses a selection of product-level
Across MSIM, investment teams may use data to monitor
metrics, including climate-related metrics
and assess climate risks in the investments they manage,and targets, where relevant, to deliver
as appropriate. MSIM’s centralised ESG Technology
effective management of sustainability
and Data team continues to develop internal ESG data
infrastructure and analytical capabilities to facilitateissues in relation to the assets we manage.
For the purposes of the FCA’s requirements, climate analysis and reporting by our investment teams.
MSIM leverages data from various external vendors in
the reporting entities are Morgan Stanleyorder to support the investment teams’ ability to monitor
Investment Management Limited (“MSIM
climate-related metrics for their portfolios. This dataLtd”), Eaton Vance Advisers International
is collected and stored in Morgan Stanley’s centralised
Limited (“EVAIL”) and Morgan Stanley & Co. data repository to allow any Morgan Stanley businesssegment, including MSIM, to access the information forInternational Plc (“MSIP”)18 (collectively,
research, portfolio analysis and construction, and client
the “TCFD in-scope entities”).
and regulatory reporting.
In relation to MSIP, the scope of this Climate Report is limited to portfolio management activities undertaken by MSIP in relation to MSIM funds.
It does not cover (i) any MSIP activities that are in scope of TCFD reporting outside of these portfolio management activities; or (ii) any other MSIP
activities which are not in scope of TCFD reporting. Please refer to MSIP’s Annual Report and Financial Statements for further entity level climaterelated financial disclosures consistent with the TCFD recommendations concerning MSIP, which have been prepared in accordance with the Companies(Strategic Report) (Climate-related Financial Disclosures) Regulations 2022.
18

26

CLIMATE REPORT 2023

2023 Metrics

Methodology
In accordance with the TCFD Recommendations, MSIM seeks
to adhere to the Partnership for Carbon Accounting Financials(“PCAF”) methodology for Financed Emissions when calculating
carbon emissions metrics across all of our portfolios, wherever
possible. PCAF is a common standard used in the financial
service industry. Carbon accounting methodologies, including
PCAF, are continually evolving, and MSIM will consider updated
guidance whenever it is issued.

In accordance with the TCFD guidance, we are reportingthese metrics to enable the assessment of the exposureof MSIM’s FCA TCFD in-scope business to the risks andopportunities linked to climate change.
Assets Under Management Metrics
As at 31 December 2023

METRIC

1

2

3

UNIT

Total Financed
tCO2e
Greenhouse Gas(“GHG”) Emissions

Total Carbon
Footprint

tCO2e/$MM
invested

Total Weighted
tCO2e/$MM
Average Carbon
revenue
Intensity (“WACI”)

METHODOLOGY∑ (Current value ofinvestment/Issuer’sEnterprise Value Including
Cash (“EVIC”) X Issuer’s
Scope 1 and Scope 2 andScope 3 GHG emissions)∑ (Current value ofInvestment/Issuer’s EVIC X
Issuer’s Scope 1, Scope 2 andScope 3 GHG Emissions)/
Current Portfolio Value∑ (Current value ofinvestment/Current
portfolio value X Issuer’s
Scope 1, 2 and 3 GHG
emissions/Issuer’s$MM revenue)

As noted above, Scope 3 is included in the calculation
methodology for these metrics. As such, this number may
not be comparable to other investment managers that arereporting on Scopes 1 and 2 only.
Investment teams may track several additional metrics on
individual products. MSIM has developed an internal analytics
dashboard to provide investment teams with real-timeaccess to sustainability data and insights, including in-depth
metrics on climate-related risks and opportunities. Further
information on product-level metrics can be found in relevant
product-level disclosures.
MSIM also continually seeks to improve data quality byliaising closely with different external data providers andobtaining updates to the datasets, as well as performing due
diligence over the methodologies used by data providers.
Data quality is a known limitation across the industry, and we
expect this to improve considerably over the coming years.

METRIC1

Total Financed
GHG Emissions

2023

2022

Scope 1
GHG emissions†

4,868,307

3,527,097

Scope 2
GHG emissions†

902,133

698,238

Scope 3
GHG emissions†

49,544,351

29,782,315

Total
GHG emissions†

55,314,791 34,007,649

2

Total Carbon
Footprint(Scope 1, 2 & 3)

Carbonfootprint

†

345

272

3

Total WACI
(Scope 1, 2 & 3)

GHG intensity of†
portfolio companies

855

816

† The 2023 metrics have been subject to independent
limited assurance by KPMG LLP in accordance with ISAE
(UK) 3000 / ISAE 3410. The limited assurance reportis available upon request, and it is recommended it isread in full.
The metrics above for 2023 represent MSIM’s FCA TCFD
in-scope business across all TCFD in-scope entities, while
the metrics for 2022 reflect only MSIM Ltd’s TCFD inscope business, as that was the only entity in scope forthat reporting period (due to the phased implementationof the FCA’s TCFD reporting requirements). The majorityof the increase in Total Financed GHG Emissions for 2023
is due to additional TCFD in-scope entities being included
within the scope of the Climate Report. The metrics
for 2022 have not been restated. Going forward, MSIM
intends to publish the metrics in this Climate Reportannually, on a consolidated basis, in accordance with FCA
requirements.
Certain securities, such as cash, FX forwards, liquidity
and hedging instruments, are determined by MSIM as nothaving any impact on the metrics presented in this Climate

CLIMATE REPORT 2023

27

Report. In some instances, it was not possible to collectdata where products and/or holdings were not held on
MSIM strategic systems. This includes investments suchas mutual funds, ETFs, securitised products and certain
derivatives, which are excluded from the calculationof metrics, as we are currently not able to gather anadequate level of data on the underlying constituentsof these investments. Such excluded investments, inaggregate, constitute a very low percentage of FCA TCFD
in-scope business, such that their exclusion does not in ourview result in a material difference to the values reported.
The calculation of the above metrics is based on available
data from a third-party data provider, although significant
data gaps exist for certain metrics and sectors.19 Where
issuer-reported data was not available, our data provider
utilised proxy methodologies to estimate the data. Suchdata may be subject to methodological limitations, datalags, coverage gaps, mapping challenges or other issues
impacting the quality of the data. There are also instanceswhere neither issuer-reported data nor estimated data isavailable through our third-party data provider. Overall,
we receive a combination of reported and estimated data
for a broad universe of listed companies that covers morethan 80% of MSIM FCA’s TCFD in-scope AUM in listed
equities and corporate fixed income securities.
MSIM takes steps to ensure that ESG data, including
TCFD metrics, adheres to the Firm’s data governance andquality standards by evaluating the appropriateness anddelivery of third-party data feeds. Additionally, investment
teams may review data on a qualitative basis, in line with
the information gathered during company engagements.
Follow-up with data vendors might also be arranged to
discuss data discrepancies.

For the purpose of this Climate Report, a single data
source has been used, which may differ from the data
source(s) used by the investment teams for their TCFD
product reporting and/or other client reports. For funds
and mandates investing in private markets, data is sourced
directly from portfolio companies or assets, where they
provide relevant reporting.

Targets
As noted previously, MSIM consists of independent
investment teams with their own strategies for managing
client assets. As a client-centric organisation, we provide
products to investors and solutions to clients that aremanaged in line with their investment policies. In many
instances, this is also dependent on our clients’ own
regulatory environments and preferences.
MSIM does not set climate-related targets outside ofits products although we do track and monitor climaterelated risks as outlined above.
Where investment teams seek to embed climate-related
targets into their strategies or where clients embedclimate-related targets into their mandates, MSIM willseek to provide our investment teams with the resourcesand expertise to measure, track and report on thesetargets and to manage assets in the best interests of ourclients. Further information on climate-related targets
in our products can be found in product-specific climaterelated disclosures.
MSIM will also continually review the appropriatenessof any other sustainability-related targets that are
deemed appropriate.

For total carbon footprint, we only consider the market value of securities for which we have underlying GHG emissions data when calculating the current
value of investments. For total WACI, we calculate as a market value weighted average of all securities for which we have underlying GHG emissions data.
19

28

CLIMATE REPORT 2023

IMPORTANT INFORMATIONThis Climate Report has been issued jointly by the TCFD in-scope entities.
Each of MSIM Ltd and EVAIL are authorised and regulated by the Financial
Conduct Authority. MSIP is authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and Prudential Regulation
Authority. Their details are as follows:
MSIM Ltd: No. 1981121. Registered Office: 25 Cabot Square, Canary Wharf,
London E14 4QA.
 EVAIL: No. 09570877. Registered office: 125 Old Broad Street,
London, EC2N 1AR.
 MSIP: No. 02068222. Registered office: 25 Cabot Square, London, E14 4QA.
The TCFD in-scope entities have not authorised financial intermediaries touse and to distribute this document, unless such use and distribution is madein accordance with applicable law and regulation. Additionally, financial
intermediaries are required to satisfy themselves that the information in thisdocument is suitable for any person to whom they provide this document inview of that person’s circumstances and purpose. The TCFD in-scope entities
shall not be liable for, and accept no liability for, the use or misuse of thisdocument by any such financial intermediary. The whole or any part of thiswork may not be reproduced, copied or transmitted or any of its contents
disclosed to third parties without the express written consent of each of the
TCFD in-scope entities. All information contained herein is proprietary and isprotected under copyright law.
The views and opinions and/or analysis expressed are those of the author or theinvestment 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. The views expressed do not reflect
the opinions of all investment personnel at MSIM or the Firm, and may not bereflected in all the strategies and products that the Firm offers. This material
has been prepared on the basis of publicly available information, internallydeveloped data and other third-party sources believed to be reliable. However,no assurances are provided regarding the reliability of such information andthe Firm has not sought to independently verify information taken frompublic 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 aconsideration 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.
This material is not a product of Morgan Stanley’s Research Department andshould 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 circumstancesand purpose.
The Firm shall not be liable for, and accepts no liability for, the use or misuse ofthis 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 shallprevail. 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 writtenconsent. This material may not be linked to unless such hyperlink is for personaland non-commercial use. All information contained herein is proprietary andis protected under copyright and other applicable law. Eaton Vance andCalvert are part of Morgan Stanley Investment Management. Morgan Stanley
Investment Management is the asset management division of Morgan Stanley.
Individual investment vehicles may have specific ESG-related goals andrestrictions. Please refer to governing documents of individual vehicles tounderstand their binding ESG criteria.

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