2021 Sustainability ReportTABLE OF CONTENTS

3

From Our CEO

4

Introduction
5
6

Our Business
About This Report

8

Approach to Sustainability
9 Sustainability Governance10	
Our Sustainability Strategy
12 2021 Sustainability Highlights
16 Our Thematic Focus Areas

22

Solutions and Services
23 Institutional Securities
28 Wealth Management
32 Investment Management
38 Community Development Finance40

The Morgan Stanley Institutefor Sustainable Investing
42 Fostering Innovation
43 Delivering Actionable Analysis
44 Developing Future Sustainable
Investing Leaders46

Firmwide Sustainability
48 Our People
52 Risk Management
56 Governance and Business Ethics

60

Appendix: SASB Index

2021 SUSTAINABILIT Y REPORT

From Our CEO
As a global leader in financial services, Morgan Stanley has a
responsibility to the communities in which we live and work.
The ongoing pandemic continued to create economic uncertainty as well as physical andmental distress over the past year. Extreme weather events continue to drive home thedaunting reality that the climate crisis is already with us, and racial tensions continue toremind us that it is critical to focus on diverse representation and racial equity. We arecommitted to using our resources as a financial institution to help in these areas.
The firm’s Sustainability, Climate, and Diversity & Inclusion Reports provide transparency around our strategy and objectives onthese important and interrelated topics for our employees, clients and shareholders. Our decision to coordinate the publicationof these reports will further enhance access to this information. I am proud that employees across Morgan Stanley are deeply
engaged in our shared responsibility to drive change. Below are a few highlights from each report:
SUSTAINABILITY

CLIMATE

DIVERSITY & INCLUSION•	The firm committed to mobilize•	Building on our commitment to reach•	The firm has made progress as we$1 trillion by 2030 to support
environmental and social solutions
that relate to the U.N. Sustainable
Development Goals.
•	We selected the first cohort of ourSustainable Solutions Collaborative,
which aims to address the mostcomplex global sustainability issues,
such as climate change, social justiceand plastic waste by supporting
innovators of transformative solutions.
•	We launched the Future of Plastic

Index, in partnership with Solactive
and ISS ESG, which features companies
leading on solutions to the plastic
waste crisis.

net-zero financed emissions by 2050,
the firm set interim financed emission
reduction targets in 2021 for lending
activities in three carbon-intensive
sectors—auto manufacturing, energy
and power—to mitigate climate risk,
support low-carbon innovation andlook to the long term.
•	The year closed with the COP26 climate

conference in Glasgow, where businessand finance leaders joined governments
in supporting positive and systemic
global change. Morgan Stanley was
one of 450 financial service providers
representing over $130 trillion in
private capital to join the Glasgow
Financial Alliance for Net-Zero(GFANZ), an organization that aims todecarbonize the global economy.

continue to focus on increasing diverse
representation across our workforce.
More immediately, we have set goals toincrease the number of women officers
globally by 25%, and Black and Hispanic
officers in the U.S. by 50% and in 2021
we made meaningful progress towards
those goals. Our new Managing Director
class reached historic highs for diverse
groups, with women representing onethird of promotes globally; and we saw
continued growth in the U.S. for Black,
Hispanic and Asian Managing Directors
as a result of our promotions and hires.
•	We deepened our investments inefforts to help close the racial wealthgap and drive greater career outcomesfor underrepresented communities
through the launch of several new
initiatives such as our Small BusinessAcademy and the Equity in Education
and Career Consortium.

I am proud of the progress Morgan Stanley has made across our sustainability, climate, and diversity efforts over the past year.
These reports highlight our progress while maintaining accountability for future commitments. While we still have more work to do,
I look forward to the journey ahead and to continuing to work with all of you.

James P. Gorman
Chairman and CEO, Morgan Stanley
June 2022
MORGAN STANLEY

3

2021 SUSTAINABILIT Y REPORT

Introduction

Morgan Stanley is a leading global financial services firm. Our subsidiaries
and affiliates advise, originate, trade, manage and distribute capital forgovernments, corporations, institutions and individuals. We maintain significant
market positions in our three business segments—Institutional Securities,
Wealth Management and Investment Management.
Our core values—Put Clients First, Do the Right Thing, Lead With Exceptional
Ideas, Commit to Diversity and Inclusion, and Give Back—guide everything we
do. Through the talents and effort of our 75,000 employees in 41 countries,
we aim to deliver results for our stakeholders today while setting strategic
goals for the future.

OUR CORE VALUES

1

2

3

4

5

PUT CLIENTS FIRSTDO THE RIGHT THING

LEAD WITH
EXCEPTIONAL IDEAS

COMMIT TO DIVERSITY
AND INCLUSION

GIVE BACK4MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTOur Business

INSTITUTIONAL SECURITIESWEALTH MANAGEMENTINVESTMENT MANAGEMENT

Provides a variety of products andservices to corporations, governments,
financial institutions and ultra-high
net worth clients. Investment Banking
services consist of capital raising andfinancial advisory services, including
the underwriting of debt, equity andother securities, as well as advice onmergers and acquisitions, restructuringsand project finance. Our Equity and
Fixed Income businesses include sales,financing, prime brokerage, marketmaking, Asia wealth management
services and certain business-related
investments. Lending activities
include originating corporate loans
and commercial real estate loans,providing secured lending facilities,
and extending securities-based andother financing to customers.
Other activities include research.

Provides a comprehensive array offinancial services and solutions to
individual investors and small to
medium-sized businesses and institutions
covering: financial advisor-led brokerageand investment advisory services;
self-directed brokerage services;financial and wealth planning services;
workplace services, including stock plan
administration; annuity and insurance
products; securities-based lending,residential real estate loans and otherlending products; banking; andretirement plan services.

Provides a broad range of investment
strategies and products that span
geographies, asset classes, and public
and private markets to a diverse groupof clients across institutional andintermediary channels. Strategies andproducts, which are offered through avariety of investment vehicles, include
equity, fixed income, alternatives andsolutions, and liquidity and overlay
services. Institutional clients include
defined benefit/defined contributionplans, foundations, endowments,
government entities, sovereign wealthfunds, insurance companies, thirdparty fund sponsors and corporations.
Individual clients are generally served
through intermediaries, including
affiliated and non-affiliated distributors.

Financial Performance(Net Revenue, USD millions)$29,8332021$24,243$26,4762020$19,086$6,220$3,734$59,7552021$48,757

2020

Institutional Securities

Wealth Management

Investment Management

Firmwide*

For more information, please see our Annual Report on Form 10-K for the year ending December 31, 2021 (2021 Form 10-K).
*Firmwide totals are inclusive of intersegment eliminations not represented in the table.
MORGAN STANLEY

52021 SUSTAINABILIT Y REPORT

About This ReportMorgan Stanley’s annual sustainability report focuses on investor-relevant environmental,social and governance (ESG) topics, goals and performance. The Sustainability AccountingStandards Board (SASB) standards for Investment Banking, Asset Management and Commercial
Banking guide the report’s data, narrative and content. In addition, we include information on
topics of interest to key stakeholders, determined by conducting periodic materiality analyses
and ongoing benchmarking exercises.

We are committed to transparent disclosure of information
across all aspects of our sustainability journey. This includes
mirroring the rigor we apply to our other public disclosures andensuring consistency in our approach to sustainability-related
reporting. Our Sustainability Disclosure Committee of seniorleaders from across the firm provides input on, reviews andapproves corporate sustainability disclosures, as well asinternal reconciliation of all facts and figures.

For full and transparent information across all aspects ofour sustainability performance, please see the following
complementary disclosures:•	
2021 Climate Report (TCFD)• Diversity and Inclusion Annual Report• 2022 Proxy Statement, pages 29–30•	2021 Form 10-K, for sustainability information relevantto the SASB framework, including with respect to humancapital management
Diversity and Inclusion
Annual Report

2021 Climate Report• Sustainability pages of our website• 2021 CDP climate-change questionnaire response• Morgan Stanley Environmental and Social Policy Statement• Morgan Stanley Statement on Human Rights•	Morgan Stanley Modern Slavery and Human Trafficking

Statement• Supplier Code of Conduct•	Morgan Stanley Investment Management’s (MSIM)

response to the Principles for Responsible Investment(PRI) reporting framework

6

MORGAN STANLEY

2021 SUSTAINABILIT Y REPORT

See page 60 for a detailed SASB index
in line with the standards for Investment
Banking, Asset Management andCommercial Banking.

MORGAN STANLEY

7

2021 SUSTAINABILIT Y REPORTApproach to
Sustainability
Morgan Stanley partners with clients and stakeholders to mobilize capital atscale to tackle sustainability challenges such as climate change and inequality.
We are committed to delivering ESG innovation alongside long-term value forclients and shareholders.

OUR SUSTAINABILITY MILESTONES

2009

2013

2015

2017

2018

2019

2020

2021

Established
GlobalSustainable
FinanceGroup

Launched theInstitute for
Sustainable
InvestingIssued ourinaugural
green bondAppointed
first Chief
Sustainability
Officer at aWall Street
firmCommitted
to mobilizing$250Bntowardlow-carbon
solutionsby 2030

Launched the
Plastic Waste
Resolution

Committed
to reachingnet-zerofinancedemissionsby 2050

Committed
to mobilizing$1Tn insustainablefinancingby 20308MORGAN STANLEY

2021 SUSTAINABILIT Y REPORT

Sustainability GovernanceFor decades, Morgan Stanley’s robust governance and business integrity have fostered clientand stakeholder trust and provided a foundation for success. Sustainability governance is integral
to our approach, led by our board of directors and embedded throughout the firm.

The Nominating and Governance Committee oversees ESG
initiatives and the Board Risk Committee oversees climate
risks, with both reporting to the full board. Our centralized
Global Sustainable Finance (GSF) team provides cross-firmsustainability oversight, with teams in Institutional Securities,
Wealth Management and Investment Management overseeing
specific initiatives within each segment. GSF helps ensure
consistent integration of sustainability considerations across
our corporate policies, business activities and operations.
Led by our Chief Sustainability Officer, GSF partners withsenior leadership across our three business segments, aswell as support services and risk and control functions. The
Morgan Stanley Institute for Sustainable Investing, which ishoused within GSF, receives guidance from an external
advisory board of experts from the private and public
sectors, as well as academia.
Also housed within GSF, the Morgan Stanley Sustainable
Insights Lab produces innovative ESG analysis and productinnovation. This team of quantitative specialists works
to catalyze data-driven solutions for clients, supports
measurement of the firm’s climate risks, helps to manage
firmwide ESG data assessments and governance, and develops
quantitative analysis on sustainability topics for our Institutefor Sustainable Investing. A wide range of senior-level councils
and working groups across the business provide expertiseand input that enhance our approach to sustainability. GSF
convenes, joins or advises each of these groups to help
coordinate activity and outcomes. Examples of key crosscutting sustainability committees and councils are below.
For climate-related steering committees, see our Climate
Report (page 12) for further detail.
FIRMWIDE SUSTAINABILITY GOVERNANCE COMMITTEES•	The Global Sustainable Business Steering Committee was•	
The ESG Franchise Committee brings together leadersfrom a variety of Morgan Stanley initiatives, including
but not limited to the Institute for Sustainable Investing,the Multicultural Innovation Lab and the Morgan Stanley
Foundation. The purpose of the Committee is to enhance
integration between Morgan Stanley teams to achieve
greater internal and external social impact.
BUSINESS UNIT SUSTAINABILITY COMMITTEES, COUNCILSAND WORKING GROUPS•	The ESG Center of Excellence coordinates and drives

commercial client-focused sustainability activity across
Global Capital Markets and Investment Banking(see page 19).
•	The Global Capital Markets and Investment Banking ESG

Steering Committee reviews ESG matters associated withcapital markets and advisory products and services to assessalignment with the firm’s ESG commitments and provides
oversight, including establishing guidelines, education andassessment of evolving trends and developments in ESG.

•	The Investment Management Sustainability Councilof senior, cross-functional leaders advises the businesssegment’s strategy, resourcing and processes forsustainable investing.
•	The Corporate Services Global Sustainability Steering

Committee and Council executes our operationalsustainability strategy, which focuses on resource efficiency,
renewable energy and other pathways to shrink ourenvironmental impact.

•	The Sustainable Supply Chain Working Group identifies

strategies to reduce ESG risks and collaborate with suppliers
to further sustainability in our sourcing practices.

established in 2021 to further institutionalize collaborationand innovation on commercial ESG activity in order toposition the firm for continued success in the field.
•	
The Sustainability Disclosure Committee brings together

senior firmwide leaders to provide input on and approve
corporate sustainability disclosures that support ourcommitment to transparency, including this report.

MORGAN STANLEY

9

2021 SUSTAINABILIT Y REPORTOur Sustainability Strategy
Focusing on ESG performance helps us reduce risk and enhance value for our stakeholders.
Morgan Stanley was an early mover within our sector, establishing a dedicated, commercial
sustainability function over a decade ago. Our strategy seeks to integrate sustainability into ourcore businesses and support functions through extensive partnerships between teams across thefirm. We execute innovative solutions for our clients that address complex ESG issues, and drive
revenue opportunities. We also take a responsible and proactive approach to sustainability in
our operations, and a transparent approach to sustainability disclosure.

Effective governance, ethical business conduct and support
for our employees underpin both our business success and ourapproach to sustainability. Our firm’s core values guide oursustainability strategy to deliver results today while doing
our part to contribute to a sustainable future.

10

MORGAN STANLEY

Sustainability activity at Morgan Stanley is organized across threepillars: solutions and services, field-building through the Institutefor Sustainable Investing, and firmwide sustainability. Our
Sustainable Insights Lab generates actionable analysis across all
three pillars that informs our sustainability strategy and solutions.
We also pursue three thematic sustainability priorities acrossour business activity, thought leadership and operations: climatechange, inclusive growth and plastic waste (see pages 14–21).

2021 SUSTAINABILIT Y REPORT

Morgan Stanley’s Sustainability Strategy
CORE PILLARSSUSTAINABLE SOLUTIONSAND SERVICES
Delivering innovative sustainablefinance and investing products
for clients, and mobilizing capitalto drive progress on complex
global challenges such as climatechange, inclusive growth andcircular economy

FIELD-BUILDING THROUGH
THE INSTITUTE FORSUSTAINABLE INVESTING
Accelerating the adoption ofsustainable investing across thecapital markets by leveraging thefirm’s expertise to foster innovation,deliver actionable analysis forinvestors and develop the next
generation of leaders in the field

FIRMWIDE SUSTAINABILITY
Integrating ESG into our businesspractices and operations, such as our
climate change strategy, proactive
ESG risk management, culture andpeople management, diversity
and inclusion, and stakeholder
engagement

QUANTITATIVE ANALYSIS DRIVEN BY THE MORGAN STANLEY SUSTAINABLE INSIGHTS LAB

THEMATIC FOCUS AREAS
CLIMATE CHANGE
Transitioning to a low-carbon economy • Managing climate risk • Operating resiliently
Being transparent and calculating emissions

INCLUSIVE GROWTH
Supporting diverse-owned businesses • Investing to reduce inequalities • Funding affordable housing

PLASTIC WASTE
Financing plastics recycling and recovery • Eliminating single-use plastics from operations
Partnering to combat the crisis

MORGAN STANLEY

112021 Sustainability Highlights
FIRMWIDE GOALS
PLASTIC WASTE RESOLUTION$1TN BY 2030 SUSTAINABLE
FINANCING GOAL

DIVERSE REPRESENTATION GOALS$600Bn+to date, including$450Bn+ in lowcarbon solutions

Through 2021, we have helped
facilitate the prevention, reduction
and removal of 13 million metric tonsof plastic waste from entering rivers,
oceans, landscapes and landfills,
making progress toward ourgoal of 50MM by 2030

Our objective is to increase
total women officers by 25% andBlack and Hispanic officers
in the U.S. by 50%

clean-tech financing • renewable energy financing
green bonds • low-carbon investments • other

SOLUTIONS & SERVICESINSTITUTIONAL SECURITIES GROUP~$300Bn
green, social, sustainability
and sustainability-linked
bond transactions supported
in 2013–2021, including
over $150Bn in 2021

70%+

of stocks in Morgan Stanley
Research coverage have
ESG data incorporated into
the Risk/Reward snapshot

WEALTH MANAGEMENT$70Bn+

in client assets invested
on our Investing with
Impact Platform,up 27% from 2020

INVESTMENT MANAGEMENT

670+ engagementswith companies on
ESG topics

A+/A

across Principles for
Responsible Investment(PRI) score card

COMMUNITY DEVELOPMENT FINANCE (2010–2021)$27Bn+The Investing with Impact
Platform is utilized by 92%
of Morgan Stanley WealthManagement representatives
and helps serve over
300,000 clients

committed in community development loans
and investments$400MM+ committed insmall-business loans

236,000+ jobs createdor retained

Unless otherwise stated, references and metrics in this report that pertain to ‘MSIM’ and ‘Investment Management’ relate to Legacy MSIM. ‘Legacy MSIM’means Morgan Stanley Investment Management, excluding those businesses that were wholly owned by Eaton Vance Corp. prior to the acquisition of
Eaton Vance Corp. by Morgan Stanley on March 1, 2021.

12

MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTFIELD BUILDING THROUGH THE INSTITUTE FOR SUSTAINABLE INVESTINGSUSTAINABLE INVESTING CHALLENGESUSTAINABLE SOLUTIONS COLLABORATIVE

400+ students from schools in 50 countries entered
our annual Sustainable Investing Challenge

Sustainable Solutions Collaborative cohorts
each receive $250,000 to develop breakthroughconcepts focused on systemic solutions
for global challenges
Students’ Home Countries

Countries Targeted for Impact

FIRMWIDE SUSTAINABILITYOPERATIONAL SUSTAINABILITY

Reacted to
24 weather andnatural hazard
eventsOperational completion ofa new wind farm equivalent
to offsetting an estimated
30% of Morgan Stanley’s
carbon footprint

93%

Progress toward
100% reduction of
single-use plastics
by year-end 2024

51%

Progress toward
90% supplier agreementby year-end 2025, asof year-end 20211

DIVERSITY & INCLUSION

1

50%

27%

39%

26%

32%

of the board
is gender and/or
ethnically diverseof our officers
globally are
womenof our global
employees are
womenof officers in the
U.S. are ethnicallydiverseof employees in the
U.S. are ethnicallydiverseProgress through 2021 reflects a revised methodology and a new target deadline of 2025.

MORGAN STANLEY

13

2021 SUSTAINABILIT Y REPORTOur Thematic Focus Areas
Economies around the world are facing ongoing pandemic-related challenges, societal inequities andpressures to transition to a low-carbon and more circular economy. Leaders in business and financemust work with governments to move in the right direction.

At Morgan Stanley, we seek to address complex, global
sustainability issues that we are best positioned to influenceby leveraging our global business reach and expertise tomobilize capital for maximum impact. This has led us to focus
on three areas that support the United Nations SDGs (seepanel), advance environmental and social impact, and support
a sustainable future for our business and stakeholders. Thesepriority areas are: catalyzing climate change, advancing inclusive
growth and addressing the plastic waste challenge.

Catalyzing the Low-Carbon Transition
Morgan Stanley recognizes the significant potential forclimate change to impact our clients, investments, operations,employees and local communities. For over a decade, wehave embraced opportunities, and mobilized capital, tosupport climate change mitigation and adaptation, working
alongside our stakeholders. In September 2020, we became
the first major U.S.-headquartered financial services firm tocommit to achieving net-zero financed emissions by 2050.
In November 2021, we released interim 2030 targets for
the Auto Manufacturing, Energy and Power sectors.
Our climate strategy is built on the foundation of four
key pillars: the transition to a low-carbon economy, climate
risk, operational resilience and transparency (see graphic
on page 15).
For more information on Morgan Stanley’s climate change
strategy and progress to date, read our latest Climate Report.

14

MORGAN STANLEY

Morgan Stanley supports the UN Sustainable
Development Goals (SDGs), which increasingly inform
our firmwide approach to sustainability. We believe
this global blueprint for achieving a sustainable futureenables the private sector to better understand key
societal challenges and help drive solutions. In 2021,
we committed to mobilize a total of $1 trillion towardsustainable solutions in line with the SDGs.
Our Plastic Waste Resolution aims to catalyze solutions
relevant to SDGs 6 (Clean Water and Sanitation), 12(Responsible Consumption and Production) and 14 (Life
Below Water). Our climate change goals, including ourcommitment to achieve net-zero financed emissions
by 2030, aim to advance solutions relevant to SDGs 7(Affordable and Clean Energy) and 13 (Climate Action).
The Morgan Stanley Social Bond aims to contributedirectly to SDG 11 (Sustainable Cities and Communities)
and indirectly to SDG 1 (No Poverty) and SDG 10(Reduced Inequalities). Other SDG-relevant products
and services are featured throughout this report.

2021 SUSTAINABILIT Y REPORT

Morgan Stanley’s Four-Pillar Climate Strategy
INTEGRATING CLIMATE ACROSS THE FIRM’S BUSINESSES, RISK MANAGEMENT AND OPERATIONS

1

TRANSITION TO A LOWCARBON ECONOMY• F irst major U.S.-

headquartered global
financial services firm
to commit to achieving
net-zero financed
emissions by 2050
• Commitment to mobilize$750Bn to support
low-carbon solutions
by 2030

2

3• Climate change• Only major U.S.-

considerations integrated
into the firm’s risk
management andgovernance processes under
the Chief Risk Officer

headquartered global
financial services firm on
Partnership for Carbon
Accounting Financials(PCAF) Steering Committee• Climate risks overseen by• Inaugural climate report

CLIMATE RISK

the Risk Committee of thefirm’s board of directors

TRANSPARENCY

4

OPERATIONALRESILIENCE• Carbon neutrality acrossglobal operations by 2022
• Source 100% of global

operational electricity needsfrom renewable sources

published in 2020

MORGAN STANLEY

15

2021 SUSTAINABILIT Y REPORT

Advancing Inclusive Growth
Inclusive growth addresses global inequalities andgenerates opportunities for all. It is an imperative forgovernments, corporations and investors, and is a corefocus of Morgan Stanley’s sustainability strategy. We define“inclusive growth” as economic gains that are broad-based
and sustainable, and that provide opportunity across all
participants in the economic system. We seek to foster inclusive
growth both within our firm and by delivering commercial
solutions that support Diversity, Equity and Inclusion (DEI),
affordable housing, community development, small businessassistance, ongoing pandemic recovery, and more.

MORGAN STANLEY’S APPROACH TO
INCLUSIVE GROWTH

Investing to Reduce Inequalities

Funding Affordable Housing

Supporting Diverse-Owned Businesses

Advancing Financial Wellness
Morgan Stanley at Work delivers comprehensive workplace
financial solutions to organizations and their employees—
through content, digital tools and access to personal
guidance—across Financial Wellness, Equity and Retirement
Solutions. To better understand how financial wellness
needs have evolved during the pandemic, Morgan Stanleyat Work partnered with the Society for Human Resource
Management (SHRM) to conduct a financial wellness surveyof HR professionals and working Americans. The results of thesurvey indicate that nearly one-third of working Americans areexperiencing finance-related anxiety and about 1 in 5 working
Americans report finance-related depression. We also foundthat organizations are missing important opportunities tohelp their workers manage their money and ease the stressof the pandemic’s financial blows by providing benefits thatspecifically address financial well-being.
As a result of the research and as part of our continued
commitment to diversity, equity and inclusion, Morgan Stanleyat Work Financial Wellness has created financial education
content geared to meet the needs of diverse segments oftoday’s workforce. The team has also added enhancements
to the Financial Wellness Digital Portal that will empowerboth participants and plan sponsors with metrics andactionable insights.
Morgan Stanley at Work financial wellness resources areavailable to U.S. full-time Morgan Stanley employees.
Offerings include an online financial assessment, a financial
wellness portal with educational content, seminars andone-on-one financial coaching.
In 2021, Morgan Stanley Wealth Management also supported
financial wellness by leveraging the firm’s longstanding
partnerships with Historically Black Colleges and Universities(HBCUs) to sponsor free digital subscriptions to Barron’s in
Education for all students in 13 such institutions. The program
offers tools to improve personal financial literacy and insightsfrom business leaders and successful investors as well as
introducing students to careers in business and finance.

16

MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTFUNDING AFFORDABLE HOUSING

In 2020, we issued a $1 billion Social Bond—our first—to
promote inclusive growth by supporting affordable housing
across the United States. Eligible projects support individuals
and families on low or moderate incomes, many of whom
struggled to meet housing costs in the pandemic-affectedeconomy. The initiative brings to life our new Social Bond
Framework, which contributes directly to SDG 11 (Sustainable
Cities and Communities) and indirectly to SDGs 1 (No Poverty)
and 10 (Reduced Inequalities).
Morgan Stanley’s $1 billion Social Bond, issued in 2020,
supports the affordable housing initiatives of Morgan Stanley’s
Community Development Finance Group, which provides
innovative financing that seeks to improve people’s qualityof life (see pages 38–39). Through March 31, 2022, the bondsupported more than 47,500 affordable housing units, with
impacts delivered to over 123,000 people. For more details
and case studies, see our 2022 Social Bond Impact Report.
MOBILIZING CAPITAL TO REDUCE INEQUALITIESTeams across our business facilitate transactions and provide
clients with products and resources that support inclusive
growth and promote diversity, equity and inclusion.
Institutional Securities: Our Global Capital Markets teamserved as Diversity and Inclusion Coordinator for 13 largescale investment-grade bond transactions in 2021, resulting insignificant deal allocations to underwriters owned by minorities,
veterans and women. The transactions included Verizon’s$25 billion Senior Notes offering and Amazon’s $18.5 billion
Senior Note offering, leading to significant deal allocations
to minority-, veteran- and woman-owned underwriters.
Expanding opportunities for diverse-led partners supports
our commitment to promote inclusive growth. As a Diversity
and Inclusion Coordinator, we act as a central point of contact
for diverse-led underwriters and help maximize their success.
Institutional Securities also houses Morgan Stanley Research,which published new findings on racial inequality in the U.S.
housing market throughout 2020 and 2021 (see page 27).

Wealth Management: Our Investing with Impact Platform
offers 80+ investment products incorporating gender and racial
equity criteria as part of the investment selection process and
52 from diverse-owned asset managers. Wealth Management’s
Diversity & Inclusion Investment Office, established in 2020,
continues to grow the number of strategies from diverse-owned
firms available for clients. Total client assets of $12 billion areallocated to investment strategies from diverse-owned firms.
These strategies are identified in the Racial Equity and Gender
Diversity Tool Kits created to help inform decisions made by
Financial Advisors to align with their clients’ impact goals.
Other Inclusive Growth tools and analysis available include a
newly launched chartbook on Advancing Diversity, Equity andInclusion; impact reporting application; Morgan Stanley Impact
Quotient®; and the new quantitative manager scoring tool DEI
Signal (for details, see page 30).
Investment Management: DEI is one of MSIM’s four priority
themes for research, portfolio company engagement andinvestment stewardship. In 2020 and 2021, MSIM launchedseveral new DEI-focused investment strategies. These include
the impact-focused Morgan Stanley Next Level Fund, whichinvests in startups led by women and diverse entrepreneurs;
Calvert Diversity Research Indices; and an enhanced MSILF
Government Securities Portfolio centered on purchasetransactions with diverse broker-dealers. (See also page 32
and case study on page 33.)

MORGAN STANLEY

17

2021 SUSTAINABILIT Y REPORTSUPPORTING DIVERSE-OWNED BUSINESSES

Closing the COVID-19 Equity Gap

We seek to employ a diverse global workforce and supplierbase. For information on Morgan Stanley’s longstanding
Supplier Diversity Program, and how we embed DEI in humancapital management, see page 48 and our Diversity andInclusion Annual Report.

In 2021, our Global Capital Markets Group continued tolead bond issuances to address COVID-19 and inequity.
These included serving as active bookrunner for Pfizer’s$1 billion Sustainability Bond. Proceeds were allocated toeligible projects including R&D and capital investment fordevelopment, manufacture and distribution of COVID-19
vaccines. Pfizer has committed to provide two billion
doses of its vaccine to middle- and low-income countries.

We also invest directly in diverse startups through theMorgan Stanley Multicultural Innovation Lab. This acts as
an accelerator for startups, supporting minority and women
entrepreneurs with an intensive five-month program.
(For more information, see our Diversity and Inclusion
Annual Report).

18

MORGAN STANLEY

The pandemic has taken an especially heavy toll on young
people’s mental and emotional health. To help themre-emerge into society, we surveyed teens through theMorgan Stanley Alliance for Children’s Mental Health,generating valuable insights for our NGO partners.

2021 SUSTAINABILIT Y REPORT

Addressing the Plastic Waste Challenge
Plastic waste is a pressing environmental challenge and an
opportunity to reinvent how the world treats natural resources
by pursuing a circular economy. Morgan Stanley is working tomobilize capital to accelerate this market transition.
In 2019, we announced our Plastic Waste Resolution to help
facilitate the prevention, reduction and removal of 50 million
metric tons of discarded plastic from rivers, oceans, landscapesand landfills by 2030. Led by the Institute for Sustainable
Investing (the Institute), our efforts include activities by eachbusiness and our global operations, as well as partnerships andexternal capacity-building initiatives.
This commitment leverages our strengths and activities in thecapital markets, engages employees across the firm and aims
to eliminate single-use plastics from our global operations.
Our goal, working with clients and partners, is to help shift
the global economy to one in which the value of plastic is fully
captured rather than wasted.
As of year-end 2021, Morgan Stanley has supported theprevention, removal or reduction of 13 million metric tons ofplastic waste from entering the environment and landfills. We
incorporate relevant transactions and operational activities incalculating our progress. While we believe research, thought
leadership and capacity building also contribute to our goal,
we do not attempt to estimate their impact in tonnage.

A

A
NS

CT

ION

S

Morgan Stanley is well positioned to help develop systemic
solutions with clients across the plastics value chain, frommaterials engineering and industrial design to consumer use
and recycling.
Our Investment Banking and Global Capital Markets teams workwith issuers to underwrite green, sustainability and blue bonds,
which finance plastics recycling and recovery projects, as well as
additional innovative financing structures to deliver impact. In
2021, these efforts with clients included the following:•	Natura & Co., the largest Latin American personal carecosmetics group, with brands including Aesop, Avon and The
Body Shop and Natura Cosméticos, successfully issued a $1
billion sustainability-linked bond with performance targets tied
to increased use of post-consumer recycled packaging, as wellas greenhouse gas emissions reduction. Morgan Stanley served
as joint bookrunner for the bond, which will support Natura’s
overall sustainability and packaging circularity objectives.
•	Liberty Tire, the largest recycler of used car tires in the

United States, issued a $410 million green term loan tosupport the transition to a low-carbon and circular economy.
Morgan Stanley acted as lead arranger for the loan, whose useof proceeds will be allocated to finance projects including thesourcing, sorting, processing and distributing of used tires into
multiple beneficial end-use markets that divert such used tires
from otherwise immediately being sent to landfills.
•	thredUP, an online marketplace for secondhand clothing, raised

AC T I VI T Y
OP

ER

A
TI

$168 million through its initial public offering in March 2021.
Morgan Stanley priced the IPO, serving as lead book-running
manager. Proceeds of the IPO will support the expansionof thredUP’s clothing resale business. thredUP helps divert
synthetic materials, including plastic microfibers, from entering
landfill, while avoiding greenhouse gas emissions and water
usage from the manufacturing of new clothing.

IN

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BU

TN

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DI

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PA

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B US

INE

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BUSINESS TRANSACTIONS

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AND AMPN

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2021 SUSTAINABILIT Y REPORT

Morgan Stanley Wealth Management’s Investing with Impact
Platform offers 15 Morgan Stanley Portfolio Solutions
Impact models focused on a range of sustainability themes(see page 30 for more detail). As part of this portfolio suite,
Wealth Management offers clients six Impact Portfolios,
across risk profiles, that seek to positively influenceenvironmental and social goals including SDG 14, Life Below
Water. In 2021, client assets invested in these strategies
reached over $790MM, with an average account size of nearly$150,000, far above the minimum investment of $10,000.
Several Morgan Stanley Investment Management strategies
incorporate risks and opportunities specific to plastic waste
within the investment process. For example, the Calvert
U.S. Ocean Health strategy assesses U.S. large-cap issuers
for their contribution to the harm and deterioration of thehealth of oceans. Specific to packaged foods, food retail andrestaurant companies, the strategy evaluates their reductionof plastic product waste, efforts to use recycled materials
and plans to replace single-use plastic products withrenewable, recyclable or compostable materials. Similarly,
the Morgan Stanley Fixed Income Sustainable strategies
evaluate how green and other labeled sustainable bonds
contribute to the use of higher recycled plastic content within
products as well as more circular product designs, with theteam actively engaging with issuers related to these topics.

Future of Plastic Index Launch
In 2021, we partnered with financial indices provider Solactive anddata provider ISS ESG on an innovative plastic-focused benchmark
index for investors. Based on a methodology developed by
Morgan Stanley, and designed to underpin new ESG-structured
products, the publicly listed Solactive ISS ESG Future of Plastic Index
highlights companies leading on the innovation and implementationof plastic waste solutions and efficient materials use. We used ourexpertise in sustainability and institutional equities to screen andrank companies, using ISS ESG data. The index responds to growinginterest in reducing plastic waste as an investment theme.

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MORGAN STANLEY

Morgan Stanley’s Private Credit & Equity platform has also
provided capital to several companies delivering plastic waste
solutions. In 2021, these investments included:•	Zero Waste Recycling, an end-to-end waste consolidation

and recycling services provider helping customers achieve
zero waste-to-landfill across materials, including various
forms of plastic; and•	Pete & Gerry’s, a Certified B Corp and producer of organic,

free-range eggs dedicated to using 100% post-consumer
recycled polyethylene terephthalate (PET) cartons that reduce
the need for virgin plastic. In addition, the company is actively
exploring packaging alternatives to reduce plastic use in
the future.
Advancing waste reduction and the circular economy is also a key
stewardship theme for Morgan Stanley Investment Management(see page 32). Morgan Stanley Research also provides actionable
information to clients seeking to integrate sustainableconsumption and plastic waste considerations within financial
decision-making. In 2021, published topics included food andpackaging, as well as dynamics in the plastics recycling market.

2021 SUSTAINABILIT Y REPORTOPERATIONSPARTNERSHIPS

Across our global operations, we made significant progress in
2021 toward our target of eliminating single-use plastics by2024. We engage our 75,000 employees to help meet thisgoal by providing alternative single-use materials that can bereadily recycled in the office. We also engage waste specialists
to support mixed-use compost collection to covert waste tofertilizer and energy.

We work with business coalitions, NGOs and researchorganizations to combat the plastic waste crisis. For example,
we are part of leading coalitions working to advance thecircular economy including the World Economic Forum’s Global
Plastic Action Partnership and the Ellen MacArthur Foundation
network. Our ongoing partnership with the University ofGeorgia and Dr. Jenna Jambeck supports the Marine Debris
Tracker, a mobile app that harnesses citizen science to gather
data on how plastic debris impacts coastlines and waterways.

We encourage employees to support this goal in theircommunities through initiatives such as:•	Our Plastic Waste Resolution Pledge, which provides

employees with tangible ways to reduce plastic use in daily
life. For example, the firm ran a Plastic Waster Track-A-Thonin June during which employees tracked items they recycled.
•	Webinars that featured information on how large and small

businesses are innovating to address plastic waste, fromreductions to recycling to reuse, featuring speakers from the
Ellen MacArthur Foundation (see Stakeholder Engagement
for more information) and Lonely Whale’s NextWave.

FIELD-BUILDINGIn addition, we offer an annual prize for investment solutions
combating plastic waste through our popular annual
Sustainable Investing Challenge (see page 44). The Sustainable
Solutions collaborative also supports companies working
to address plastic waste. For example, the first cohort
included a company, Siklus, that operates plastic waste
refill stations in supermarkets and on mobile delivery carts(for more information, see case study on page 41). In 2021,
Morgan Stanley’s then Chief Sustainability Officer, Audrey Choi,
launched a sustainability-focused podcast series that explores
the issue of our global plastic waste problem in addition toother relevant topics. The series features in-depth discussions
with leading innovators and experts committed to finding
solutions to plastic waste and other sustainability challenges.

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2021 SUSTAINABILIT Y REPORT

Solutionsand Services

Morgan Stanley’s three business segments advance our sustainability
priorities by driving innovation and transformational progress acrossglobal capital markets. Our goal is to be the financial services partnerof choice to create sustainable, long-term value for clients. We havea proven track record of developing innovative financial solutions
and advisory services designed to deliver both competitive financial
returns and positive impact.

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2021 SUSTAINABILIT Y REPORT

Institutional Securities
Institutional Securities uses the scale and speed of capital markets to generate positiveenvironmental and social benefits for innovative companies. Teams across the business—from Global Capital Markets to Public Finance, Investment Banking, Equity & Fixed Income,and Research—work with clients to meet these objectives.

IMPACT BY THE NUMBERS~$300Bn

green, social, sustainability and sustainability-linked
bond transactions supported in 2013-2021,
including over $150Bn in 2021

~130MWhedged in 2021 for new-build renewable projects
and nearly 400MW for existing renewableprojects through our commodities desk70%+of stocks in Morgan Stanley Research coverage have
ESG data incorporated into the Risk/Reward snapshot

CASE STUDYSUPPORTING MARKET
DEBUT OF SUSTAINABILITY
CHAMPION ALLBIRDS
Morgan Stanley acted as lead underwriter for the
successful market launch of Allbirds in November
2021. In going public, the sustainable shoe andclothing retailer hopes to attract investors that
support sustainability-focused companies. Allbirds’
ambition is to “reverse climate change through betterbusiness,” and the company has built a loyal, young
following for its sustainably sourced wool sneakers,
slip-ons and accessories.
A certified B Corp and Public Benefit Corporation,
Allbirds aims to source 100% of its wool supply fromregenerative farming sources by 2025. The firm’s
pioneering Sustainability Principles and Objectives
Framework was developed by an advisory councilof cross-sector professionals with ESG expertise,setting a standard for best-in-class ESG emerging
growth companies going public. The framework
contains 19 criteria designed to demonstratecommitments to ESG principles.

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2021 SUSTAINABILIT Y REPORT

2021 Sustainable FinanceTransaction Highlights
Driving Sustainable FinanceMorgan Stanley has been a leader on green andsustainability bonds since 2013. As sustainable financebecomes increasingly mainstream, our commercial teams
continue to expand their frontiers into new products,
services and markets.
The Morgan Stanley ESG Center of Excellence coordinatesand drives our expanding commercial client-focusedsustainability activity. Led by the Vice Chairman of Global
Capital Markets, the ESG Center of Excellence convenes
senior leaders from Investment Banking, Fixed Income
Capital Markets, Equity Capital Markets, Leveraged Finance,
Structured Solutions and Global Sustainable Finance.
In 2021, our efforts to mobilize capital to support
sustainability solutions achieved new reach and scale.
To the right, we report on key transactions that contributeto our $1 trillion sustainable solutions financing goal,
which we have mobilized over $600 billion toward to date,
and that support our inclusive growth and plastic waste
priorities. For an overview of our transactions that
support the transition to a low-carbon economy,please see our 2021 Climate Report.

€1.5BnServed as joint global coordinator and joint bookrunnerfor Acciona Energía’s IPO on the Spanish Stock Exchange,
representing the largest IPO by a European renewableenergy company over the past five years at the time of IPO.

$49MM

Served as sole manager for the Buffalo Sewer
Authority’s largest Environmental Impact Revenue
Bond yet. The transaction will help fund rain gardens,
tree planting and permeable pavement to reduce runoff
and improve the city’s water quality. The transaction
aims to impact SDGs 1, 3, 6, 8, 10 and 13.

$519MMFirst Financial Decision Makers Conference
Dedicated to Sustainability
Approximately 300 corporate clients attended oursustainability-themed Financial Decision Makers
Conference in 2021, reinforcing the growing importanceof ESG issues to corporations and investors.
Experts provided advice on how companies can navigate
the changing ESG landscape, communicate their strategy
with optimal impact and focus on factors that boost
shareholder value.

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MORGAN STANLEY

Acted as lead underwriter for Coursera’s initialpublic offering. The online learning platform, a certified
B Corporation, seeks to provide universal access toworld-class flexible and affordable high-quality learning
opportunities and currently serves nearly 80MM
individual learners.

2021 SUSTAINABILIT Y REPORT$2.75Bn

Acted as the exclusive financial advisor to leading
independent U.S. renewables developer Cypress Creek
Renewables in its sale to EQT Infrastructure V fund by
HPS Investment Partners and Temasek Holdings.

Acted as financial advisor to raise equity capital for
Northvolt, a Swedish electric vehicle battery developer,
which will finance capacity and R&D efforts to meetsoaring customer demand.

€13Bn/€14Bn$1.6BnServed as joint bookrunner twice for the European
Commission’s SURE social bonds, designed to learn
from the pandemic’s economic fallout by mitigating
unemployment risk during an emergency.

$45MM

Lead managed the first social bond launched byGallaudet University in Washington D.C., the world’s
premier higher education institution serving deaf andhard-of-hearing people. Proceeds will finance the Campus
Master Plan, including innovative DeafSpace architecturaldesign. The transaction aims to impact SDGs 4 and 10.

Served as bookrunning manager on the $1.6Bn initialpublic offering for Oatly, a Swedish food provider focusingon oat-based drinks that deliver maximum nutritional value
and minimal environmental impact.

£6Bn

Acted as joint Bookrunner for the U.K. Debt
Management Office’s 32-year Green Gilt issuance.
The proceeds will be used to support clean transportation,
renewable energy, energy efficiency, living and natural
resources, climate change adaptation, and pollution
prevention and control.

$2Bn$1.5BnServed as active bookrunner for NextEra Energy’s
inaugural green bond issuance. The bond structure
combined a use-of-proceeds approach with a coupon stepup if NextEra does not confirm proceeds have been fully
allocated toward eligible projects, which include windand solar power energy generation projects and/or
battery storage projects.

Served as active bookrunner on Walmart’s debut
Green Bond, which set the record for largest corporate
green bond tranche at the time at $2Bn, supporting
Eligible Project categories including Renewable Energy,High Performance Buildings, Sustainable Transport,
Zero Waste, Circular Economy and more.

$6.7BnActed as financial advisor on matters related to thedirect listing and served as the sole Designated Market
Maker in setting the opening public price of Warby
Parker’s shares. Warby Parker is a mission-driven lifestylebrand that sells eyewear online and through retaillocations throughout the United Sates. The company
partners with nonprofits to provide eye exams and donate
glasses to communities in need and is a certified B Corp
and a Public Benefit Corporation.

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2021 SUSTAINABILIT Y REPORT

Debt Capital Markets

Public FinanceMorgan Stanley has a long track record of issuing andsupporting first-of-their-kind bonds that raise capital for
positive environmental and social impact. In 2021, we
continued to collaborate with corporates, financial institutions,supranationals, sovereigns, agencies, municipalities andnonprofits to structure innovative financing solutions forcomplex sustainability challenges.

Morgan Stanley continues to lead the U.S. municipal andnonprofit bond market with more senior managed green, socialand sustainability bonds than any other underwriter. Thisevolving field brings lasting environmental and social benefits tocommunities around the United States. In 2021, we supported
issuances across a number of thematic areas including affordable
housing, renewable energy, mass transportation, climate
resiliency, sustainable water and wastewater, green buildings,
cultural institutions, and education facilities. In addition, our
Public Finance Group works with municipal issuers to enhance
disclosure on green, social and sustainability bond transactions
in line with the International Capital Market Association’s(ICMA) Principles and Guidelines.

Raising capital for low-carbon solutions that advance SDG 7
and SDG 13, including those highlighted in our Climate Report,
remains a global priority. In addition, we continue to expand
our efforts to address issues of systemic injustice through thecapital markets. We both underwrite and issue social bondsthat address pressing social challenges such as affordable
housing (see also page 38 and page 39).
Our broader goal is to make the sustainable finance market
more inclusive while preserving its transparency and integrity.
We help steer the market’s development as an advisory
council member to the Green Bond Principles and Social
Bond Principles Executive Committee.

Equity Capital Markets
Our Equity Capital Markets Group continues to deliver
financing solutions for multiple providers of sustainableproducts and services, including clean energy and technology
issuers. Over the past year, innovative firms we supported
included Warby Parker, Oatly and Acciona Energia (seehighlights on pages 24–25).

In March 2021, Environmental Finance named Morgan Stanley
Lead Manager of the Year for U.S. Municipal Social andSustainability Bonds. Social issues remained at the forefront of
our Public Finance Group’s market activity throughout the year,
particularly in the affordable housing, education and cultural
institution sectors. We led affordable housing financing totaling
approximately $1.5 billion in California, Connecticut, Iowa,
Maryland, Massachusetts, New York, Oregon and Rhode Island.
The group also led landmark financing for KIPP NYC Public
Charter Schools to finance facilities that mainly benefit
students from minority and low-income backgrounds.

Financing and Advisory Services
Our Investment Banking Division teams increasingly advise
clients and mobilize capital to support sustainability-focusedbusinesses. Our industry, regional and country teams
support corporations, financial institutions and government
clients looking to execute innovative solutions that address
sustainability challenges and help them meet sustainability
goals. Over the past year, innovative firms we advised
included Cypress Creek, Allbirds and Coursera, among others(see highlights on pages 24–25).

Morgan Stanley was named Lead Manager of the Year, U.S. Municipal Sustainability Bonds
and U.S. Municipal Social Bonds, by Environmental Finance.

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2021 SUSTAINABILIT Y REPORT

Empowering Women Portfolio Managers
Empowering women portfolio managers is a major focus andpoint of pride for our Institutional Securities business.
For the past nine years, we have convened the Morgan Stanley
Women’s Investment Roundtable, a two-day stock-picking
roundtable that has become a marquee event in the asset
management industry. In 2021, we also hosted the fourthannual Morgan Stanley Women’s Investment Leadership
Conference. These events have raised our standing withallocators looking for diverse portfolio managers and have
led to many participants launching their own funds, with
Morgan Stanley as the go-to prime broker.
In addition, we partner with external organizations such as
Capitalize for Kids to help them improve the diversity of
portfolio managers at their events.
We have built a global community of over 75 female portfolio
managers, helping them make connections with one another,
within the firm and externally, to achieve the investor exposure
they need for personal success and success as a fund manager.

Our Commodities Division works with Institutional and Corporateclients to acquire exposure to and purchase renewable energy
and environmental commodities markets. As carbon markets
continue to evolve globally, Morgan Stanley is an active participant
in carbon credits, offsets and renewable energy certificates. The
team also launched the Morgan Stanley Global Carbon Emissions
Index to provide a simple way for investors to gain access to theprice of carbon and the growing number of contracts globally.

Sustainability Research
When investors take sustainability considerations into account intheir financial decision-making, the cumulative effect can make adifference across the global economy. To support ESG integration,
Morgan Stanley Research analysts use a sustainability lens to
conduct investment research across equities and fixed income. Our
Global Sustainability Research team leads this work, providing
actionable information to clients in the following areas:•	
Driving thought leadership on decarbonization. The team has

Equity and Fixed Income
Our Equities and Fixed Income divisions integrate ESG data,
analytics and insights to deliver sustainability thought leadershipand product innovation to institutional clients. In 2021, thisincluded launching an innovative Future of Plastic benchmark
index in partnership with financial indices provider Solactive anddata provider ISS ESG (see Approach to Sustainability on page 8).

identified pathways to decarbonization for the global economy
and explored the far-reaching implications across sectors.
Their analysis quantifies investment across key decarbonization
technologies to achieve Paris Agreement-aligned climate goals.
• Analyzing the regulatory backdrop. Regulations governing

sustainable investing and key ESG investment themes are
evolving quickly and vary across the globe. To navigate thislandscape, Global Sustainability Research provides clientswith timely analysis and forward-looking expectations. Topics
include the EU Sustainable Finance Disclosure Regulation, EU
Taxonomy, central bank stress tests and global ESG disclosure.

Our Institutional Equity Division (IED) continues to provide asset
manager, asset owner and corporate clients with sustainability
solutions including but not limited to thought leadership, ESGfocused corporate access events, capital introduction on ESG•	Delivering in-depth analysis of key sustainability themes.
fund launches, data and analytics to identify portfolio exposures,
For example, this year the team established a framework andand thematic sustainability baskets developed jointly with thetools to help investors assess biodiversity risk. Collaborating
Morgan Stanley Sustainable Insights Lab. The baskets identify
with sector teams, the framework identified “solution stocks”
companies with sustainability-driven revenues across a variety
highlighting investable firms whose products or servicesof factors including environmental intensity, business practices,
address key drivers of biodiversity loss.
and social metrics. IED also hosted the second annual Sustainable•	
Shining a spotlight on social inequalities. This year, Global
Alpha Forum showcasing leading ESG long/short managers,
Sustainability Research led a series of investigations into thethe 6th Annual Sustainable Futures conference as well as theimpact and economic implications of racial inequality on U.S.
inaugural ESG Private Capital Markets day showcasing 15 private
homeownership. Conducted with our Securitized Productcompanies identified as ESG solution providers.
Group, the research examined lending practices and mortgage
In our Fixed Income Division, Morgan Stanley continues to expand
rates during the COVID-19 pandemic and the sharp recession
ESG capabilities and solutions in the global credit market. Fixedthat ensued. It found that for Black and Hispanic borrowers,
Income teams have built low-carbon and ESG-optimized versionsacquiring a mortgage is more difficult and owning a homeof investment-grade and high-yield credit default swap Indices.
more expensive. The report explored potential policy paths
The Securitized Products Group (SPG) has worked with agency
to tackle these inequalities.
issuers to launch sustainability-labeled transactions focused•	
on expanding access to affordable housing through Mortgage
Providing ESG risk/reward analysis. Each stock in
Backed Securities. In addition, the SPG teams worked with global
Morgan Stanley’s Research coverage contains a risk/reward,
alternative investment managers to integrate ESG data andsnapshot that summarizes fundamental views. We are now
climate risk considerations into Collateralized Loan Obligations
integrating ESG data and analysis into the risk/reward forby leveraging machine learning techniques to expand coverage.
more than 70% of the stocks we cover.
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2021 SUSTAINABILIT Y REPORT

Wealth Management
Individuals, families and institutions are increasingly seeking to make a positive difference inthe world with their capital. For the past decade, Morgan Stanley Wealth Management’s Investingwith Impact Platform has connected clients to investment strategies across asset classes andportfolio solutions seeking to generate both market-rate financial returns and measurable, positiveenvironmental and social impact. We have developed innovative tools and analysis to support
manager evaluation and selection based on impact. Investing with Impact has developed robust
investment frameworks and insights across key themes such as: Climate Change and Fossil-Fuel
Aware, Gender Equality, Racial Equity and Faith-Based Investing.

IMPACT BY THE NUMBERS$70Bn+

in client assets invested on our Investing with Impact Platform,up ~27% from 2020, with $12Bn allocated to products
from diverse-owned asset managers

The Investing with Impact Platform is utilized by 92%
of Morgan Stanley Wealth Management representatives
and helps serve over 300,000 clients~$45Bnin client assets with a Morgan Stanley IQ profile(see details on page 30)

CASE STUDYBACKING LEADERS ON
DIVERSITY, EQUITY AND
INCLUSION
Morgan Stanley is committed to partnering with clients
to mobilize capital at scale that seeks to advance equity
across dimensions such as race, ethnicity, gender and more.
In 2021, we enhanced the Investing with Impact Diversity
Balanced and Equity Portfolios to emphasize diverse asset
managers, as well as investment strategies that focus oncompanies with strong workplace DEI policies, and those
producing products and services that benefit diverse
communities. Further we committed to donating funds,
based on assets raised, to qualifying nonprofits advancing
DEI.1 We constructed these portfolios using our newly
updated Investing with Impact framework, which leverages
the Three I’s of Impact: Intentionality, Influence andInclusion (see graphic on the right).
Also in 2021, we released DEI Signal, a quantitative manager
scoring tool, that seeks to identify asset managers taking
the lead to make their organizations more diverse andinclusive. DEI Signal is the latest of many resources that
Morgan Stanley has developed to be more inclusive andto help the industry become more inclusive as well.
Wealth Management’s Diversity & Inclusion Investment
Office, established in 2020, continues to grow the numberof diverse-owned strategies available for clients.

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MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTOur Investing with Impact Framework Leverages the Three I’s of Impact: Intentionality, Influence and Inclusion
INTENTIONALITY
Intentional investment process that seeks to generate market-rate returns alongside positive social and environmental impact in
one or more of the following ways:
Minimize Objectionable Impact

Restriction Screening

Reduce exposure to companies
that detract from the intended
positive impact

Generate Targeted Impact

ESG Integration

Consider environmental, social andgovernance (ESG) across corporate
practices in the investment process

Thematic Solutions

Focus on companies whose
products and services contributeto sustainability solutions

INFLUENCEINCLUSION2

Active Ownership

Diverse Firm OwnershipManagement engagement, strategy setting, proxy voting,resolution filing, filling board seats and more to modify
behavior of portfolio companies to generate better socialand environmental outcomes

and/orDiverse Representation Across Investment Professionals

and/orMarket Building

Seek to influence the industry through collaborative
affiliations, and adopting global frameworks

2	“Inclusion” defined as diverse asset manager ownership and/or diverse portfolio manager representation. Morgan Stanley’s Global Investment Management
Analysis (GIMA) team defines “diverse asset managers” as those with 50% or greater ownership by women or racial/ethnic diverse individuals. This definitionaligns with the U.S. Equal Employment Opportunity Commission categories and includes: Hispanic or Latino, Black or African American, Asian, American
Indian or Alaska Native, or Native Hawaiian or other Pacific Islander. “Diverse representation” is defined as 50% or greater female named portfolio managers,
as reported by the asset manager.

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2021 SUSTAINABILIT Y REPORT

Investing with Impact

Morgan Stanley IQ

Investing with Impact offers Wealth Management clients theopportunity to align their investments with their values through15 Morgan Stanley Portfolio Solutions Impact Models andover 200 investment strategies, plus additional customizable
opportunities including restriction overlay screening. The
portfolio solutions start at $10,000 to invest, and capture
the firm’s best thinking on asset allocation, manager selection,
portfolio construction and risk management in a single unified
managed account. In 2021, total client assets across the suiteof 15 reached over $1.5 billion, up over 89% compared to 2020.
Investors can seek to advance broad sustainability solutions
or target specific issues such as mitigating climate change or
supporting diversity and inclusion or community development
through these solutions.

Morgan Stanley IQ® is an award-winning3 and patented4
application that empowers clients to track their portfolio’salignment to their unique impact and financial goals. The
proprietary application provides clients with a comprehensive
framework to identify and prioritize over 100 social andenvironmental impact preferences. It harnesses the insights
of multiple third-party data sources and proprietary
Morgan Stanley analytics to assess the alignment ofinvestments with those unique impact preferences andglobal frameworks including the United Nations Sustainable
Development Goals. It also equips Morgan Stanley Financial
Advisors with suggestions for investment solutions that
may better align clients’ portfolios over time with their
top-priority impact preferences.

In 2021, Morgan Stanley won Private Wealth Management Magazine’s award for Best Private Bank
for ESG Technology, North America, based on the achievements of Morgan Stanley IQ.

3https://pwmwealthtechawards.com/

4

U.S. Pat. No. 11,188,983

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MORGAN STANLEY

2021 SUSTAINABILIT Y REPORT

Morgan Stanley IQ’s client-centric approach is helping us
deepen relationships with existing and new clients including
individuals, families and institutions. In 2021, we built on
Morgan Stanley IQ by launching Impact Signal, one of theindustry’s first holistic quantitative manager scoring tools. It
enables our Financial Advisors to evaluate more than 15,000
funds and separately managed accounts quantitatively
on the strength of their impact. Along with DEI Signal, Impact
Signal supports clients’ ability to measure the impact of theirportfolio across the three Is of Impact.

In 2021, we built on Morgan Stanley IQ by launching
Impact Signal, one of the industry’s first holistic
quantitative manager scoring tools.

Equipping Financial Advisors
The Investing with Impact team supports our Financial Advisors,
Private Wealth Advisors, International Client Advisors andInstitutional Consultants to better serve clients in pursuingtheir financial and impact objectives. Our educational resources
include an online curriculum launched in 2017 and updated
annually, thematic implementation guides, and regular updates
on sustainable investing trends.
To encourage excellence and leadership among this population,
we introduced the Investing with Impact Director designationin 2018 for impact-focused practitioners. To achieve this
distinction practitioners must meet continuing-education
requirements, pass an exam and demonstrate a track record
in implementing Investing with Impact products and solutions
on behalf of clients. In 2021, there were 88 Investing with
Impact Directors, and we hosted our seventh annual Investingwith Impact Directors gathering. Topics presented by internaland external experts included market trends, opportunities
across asset classes and highlights on key sustainability themes
such as climate change and DEI.

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Investment Management
Morgan Stanley Investment Management (MSIM) is committed to ESG-informed investment decisionmaking across all asset classes to support the interests of our clients and their portfolios. We believethat ESG factors drive new investment opportunities and contribute to both risk mitigation andlong-term investment returns. In addition, we may leverage our influence as an investor to drive
better investment performance alongside improved corporate sustainability practices and outcomes.
In March 2021, MSIM acquired Eaton Vance, including subsidiary Calvert Research and Management(Calvert), a longtime leader among U.S. responsible investment management companies, andsubsidiary Parametric, a leading provider of customized, ESG and tax-managed solutions. Adding
Calvert’s world-class ESG research and expertise further enhances our ESG integration, portfolio
company research and engagement, and suite of sustainable products tailored to our clients’sustainable investing objectives. As a combined organization, the strength of our commitment
to ESG can be seen in our actions, industry partnerships and people.

IMPACT BY THE NUMBERS$60Bn+

sustainable fund assets under management across
MSIM and Calvert investment strategies5 (please refer to MSIM
Sustainable Investing Spectrum on page 37 for definitions)670+

company engagements in 2021 covering sustainability
issues ranging from decarbonization and climate risk todiverse and inclusive business practices

A/A+

ratings achieved throughout our most recent Principles
for Responsible Investment (PRI) scorecard

5	The AUM figures referenced here relate to our ‘Sustainable Core’ and‘Sustainable Objective and Impact’ AUM (as defined on page 37) of Legacy
MSIM strategies plus total Calvert Research and Management AUM.

Unless otherwise stated, references and metrics in this report that pertain to‘MSIM’ and ‘Investment Management’ relate to Legacy MSIM. ‘Legacy MSIM’ means
Morgan Stanley Investment Management, excluding those businesses that werewholly owned by Eaton Vance Corp. prior to the acquisition of Eaton Vance Corp.
by Morgan Stanley on March 1, 2021.

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MORGAN STANLEYCASE STUDYNEXT LEVEL FUND
In June 2021, we launched the impact-focused
Next Level Fund with anchor corporate partners
Hearst, Microsoft and Walmart to invest inpromising diverse startups.
Part of MSIM’s Private Credit & Equity platform,
the fund invests in primarily early-stage technology
and technology-enabled companies whose founding
teams include women or diverse members. Target
sectors include, among others, technology, consumer/
retail, financial technology, insurance, healthcare,logistics, industrials, and media and entertainment.
The fund is managed in partnership with
Morgan Stanley’s Multicultural Client Strategy
Group. It builds on the expertise of our Multicultural
Innovation Lab, our in-house startup accelerator,
focused on early-stage women- and diverse-led
startups. Chosen firms will benefit from increased
visibility, access to capital and strategic assistance.
 he case studies in this section are provided for illustrativeT
purposes only. There is no assurance that the engagements will
be successful and/or result in positive investment outcomes.

2021 SUSTAINABILIT Y REPORTMSIM Sustainability GovernanceOur commitment to sustainability is reflected in our actions,industry partnerships and people. In addition to a centralized
Sustainability Team, we employ dedicated sustainability
experts within our largest investment platforms.
In 2021, we introduced a new Sustainable Investing Policy(“SI Policy”) to replace the previous MSIM ESG Approach andPrinciples. The SI Policy guides our investment teams andregional entities with an emphasis on portfolio management
and investment advisory and fund management services for
MSIM-branded funds. Within this broad framework, each
investment team has its own investment philosophies andstrategies for managing client assets and deploys its own skill
and judgment in assessing ESG-related risks and opportunities.
We provide ESG support to our portfolio managers andinvestment teams through our Sustainability team, theInvestment Management Sustainability Council, and theMorgan Stanley Institute for Sustainable Investing. The
Sustainability Council is composed of senior, cross-functional
business and investment leaders who advise on sustainable
investment strategies, culture and client engagement acrossteams to ensure consistency. It is co-chaired by our Global
Head of Sustainability for Investment Management and theChief Responsible Investment Officer of Calvert Researchand Management.
Our Sustainability team, led by the Global Head of
Sustainability, is responsible for MSIM’s collective sustainablebusiness efforts. The team helps launch thematic sustainable
funds, advises clients and produces sustainability data, tools
and research to support our investment teams. The teampartners with the Sustainable Investing leads for each of ourinvestment platforms to coordinate global initiatives, enhance
ESG integration practices and deliver best-in-class sustainability
products and solutions. Our dedicated Global Stewardshipfunction, part of the Sustainability team, supports and helps
coordinate our proxy voting and investee engagement activity.

APPROACH TO SUSTAINABLE INVESTING

MSIM defines sustainable investing as a spectrum of practices
that uses ESG information and criteria to deliver returns
for clients and shape investment solutions. Our day-to-day
approach to sustainability includes the following activity:•	
Active Ownership: investment teams employ the shareholder

rights and stakeholder influence that we exercise on behalfof our clients to encourage, where relevant, strong ESG
practices with issuers, borrowers and counterparties•	
ESG Integration Across Asset Classes: applying thoughtfulconsideration of material ESG factors as appropriate forinvestment strategies and asset classes•	
Sustainable Investing Solutions: providing our clients withinvestment solutions that align with their returns objectives
as well as sustainability preferences and needs.

Joining Forces to Advance
Racial Equity in Municipal Markets
In September 2021, we partnered with JUST Capital andother investors to launch the Municipal Issuer Racial
Equity & Inclusion Engagement Framework. Implemented
in collaboration with minority-owned municipal bondunderwriters, this initiative aims to facilitate dialogue on
racial justice between U.S. issuers and investors andencourage transparent disclosure of social metrics.
MORGAN STANLEY

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2021 SUSTAINABILIT Y REPORT

Driving Sustainability Through Active
Ownership
Active ownership is the hallmark of our approach to investing.
As active managers and long-term investors, we believe wehave both a duty and an opportunity to steward the capital
we manage. Our investment teams embrace this opportunity
by engaging directly with their portfolio companies onsustainability topics and by effectively exercising our proxyvoting and other rights as shareholders.
Teams typically take a bottom-up approach to selecting
engagement topics, focusing on those most material toa particular holding. However, we recognize that certain
environmental and social challenges can cause systemic risk
to the economy and capital markets and can even pose an
existential threat. In response, we established four priority
areas in 2020 for our thematic company engagement andasset stewardship that directly align with 11 of the UN SDGs
(see graphic). Our clients provided input on these engagement
priorities, which affects our investment teams to varying degrees
and that we have continued to pursue throughout 2021.
Our ESG engagement serves three main purposes: assessing
the materiality of ESG issues to a company and its sector,
evaluating the company’s response and monitoring progress toinfluence adoption of better practices. In 2021, our investment
teams conducted over 670 engagements on sustainability topics.
MSIM views proxy voting as an integral part of active ownership.
Exercising our proxy voting rights gives us the opportunity to
guide companies in which we invest toward better environmental,social and governance practices, which we believe produce
attractive returns for our clients over the long term. Proxy
voting decisions are typically made in-house by members of theinvestment team and the Global Stewardship team. In 2021,

Our Thematic Priorities for Engaging Companies

DECARBONIZATION &CLIMATE RISKCIRCULAR ECONOMY &WASTE REDUCTION

DIVERSE & INCLUSIVE
BUSINESSDECENT WORK &RESILIENT JOBS

Supporting the transition
to a low-carbon economy
in line with Paris
Agreement goals

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

Supporting businesspractices that create a morejust and inclusive society

Supporting decent work
across the entire value chain
and making workforces
resilient in the face ofinnovation and change• 	Renewable energy andclean tech• 	Energy efficiency•	Recycling and reuse• 	Physical impact adaptation• Sustainable sourcing• 	Just transition• Lifecycle analysis• Water stewardship•	Affordable access toessential services• Investing in communities• Racial justice• Pay equity• Board/employee diversity• Biodiversity

This represents how the portfolio management team generally implements its investment process under normal market conditions.
See Disclosure page for important information concerning the Sustainable Development Goals (SDG) icons.

34

MORGAN STANLEY• 	Automation andthe workforce• Supply chain management• Living wage
• Workforce well-being

2021 SUSTAINABILIT Y REPORTMSIM voted at over 7,000 meetings (across 74 different
markets) and on more than 1,700 shareholder proposals. We
backed 68% of all shareholder proposals globally, with thehighest support for those related to human rights disclosure,political lobbying and spending, and board and employee
diversity.

CASE STUDYOur Fixed Income team further enhanced their active
engagement efforts during 2021. The team launched a newengagement strategy and conducted nearly 200 ESG-focuseddialogues with companies, governments and other key players(see the case study below for an example). About 40% of the
dialogues were predominately focused on decarbonizationand climate risk.

MSIM’s International Equity team engaged with amultinational consumer goods portfolio company
following media and NGO allegations of labor rights
violations by its Asian suppliers. Reported abuses
included passport retention, poor living conditions,child labor and excessive recruitment fees for
migrant workers.

For more information on our approach to engagement andproxy voting policies in 2021, see MSIM Proxy Voting Policy
and MSIM Engagement & Stewardship Principles.

The team probed the company’s monitoring andremediation capabilities and was encouraged thatits leaders had addressed all supplier violations,commissioned independent human rights assessments
and created remediation plans. These included
reimbursing recruitment fees and working with their
suppliers, NGOs, governments and peers to increase
leverage. The company also terminated suppliers that
repeatedly failed to comply with its code of conduct.

CASE STUDYEVALUATING COMPANIES ON
DIVERSITY & INCLUSION
In 2021, MSIM’s Fixed Income team engaged ondiversity and inclusion practices with several
European high-yield issuers. These included aU.K.-based manufacturer with an all-male boardof directors and senior management team.

SUPPORTING DECENT WORK
AND RESILIENT JOBS

In addition, the company is now partnering with
NGOs and a human rights research institution on
improvement plans after we urged them toaddress the root causes of their supply-chain
challenges. These efforts include working directlywith smallholder palm oil farmers to improvelabor practices.

The company’s ability to appoint more senior
women had been constrained by intense acquisition
activity. While appointing women directors wasa stated priority of the Nomination Committee,
there was no specific timeframe for doing so andthe company also lacked an aggregated reporting
strategy, at the group level, including on pay equity.
Our team concluded that the company’s intentions
were not supported by concrete near-term plansto change their practices, influencing the team’s
decision to sell the company’s bonds.

MORGAN STANLEY35

2021 SUSTAINABILIT Y REPORTESG Integration and Sustainable
Investing Solutions
Our investment platforms generally integrate materiallyrelevant sustainability risks and opportunities into theirinvestment decision-making process. This includes due diligenceand research, valuation, asset selection, portfolio construction
and ongoing investment monitoring.
We offer clients options that range from funds that integrate
ESG factors throughout the investment process to MSIM
labeled Sustainable Funds that seek to achieve attractive
financial returns alongside positive environmental and/or
social impact (see graphic on page 37 for more detail).
In 2021, Integro, our first global impact fund, reached the fiveyear mark with a significant positive social and environmental
impact on emerging markets around the world. Managed by
our AIP Private Markets Solutions Group, the fund’s benefits
through 2020 include giving financial access to more than two
million small borrowers, supporting 44,000 jobs, and providing
education and training facilities for 800,000 children. From
Africa to Latin America and South Asia, the fund increasingly
invests directly in companies with sustainability-driven businessmodels such as solar power and affordable medical equipment.

36

MORGAN STANLEYIn 2021, we expanded our Sustainable Funds suite and thematic
focuses, adding new strategies across private and public
investment capabilities. For example:•	We launched various diversity-themed funds in line with

Morgan Stanley’s core value to Commit to Diversity andInclusion. This included the Next Level Fund, investingin early-stage companies whose founding teams include
women or diverse members.
•	In Europe, the EU Sustainable Finance Disclosure Regulation(“SFDR”) is now in force and MSIM’s public-in-scope products
included 34 classified as either “funds which promotesustainable characteristics” (Article 8) or “funds with asustainability or carbon-reduction objective” (Article 9).
For more information on our client-driven approach to
Sustainable Investing, download the Investment Management
Sustainable Investing Policy.

2021 SUSTAINABILIT Y REPORTMSIM’s Sustainable Investing Spectrum
INCORPORATING SUSTAINABILITY ACROSS INVESTMENTS AND ASSET CLASSES

Unless otherwise stated, references and metrics in this report that pertain to ‘MSIM’ and ‘Investment Management’ relate to Legacy MSIM. ‘Legacy MSIM’ means
Morgan Stanley Investment Management, excluding those businesses that were wholly owned by Eaton Vance Corp. prior to the acquisition of Eaton Vance Corp.
by Morgan Stanley on March 1, 2021.

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2021 SUSTAINABILIT Y REPORT

Community Development FinanceMorgan Stanley helps deliver lasting positive changes in communities across the United States.
Our program’s track record in meeting community needs has consistently earned Morgan Stanley’s
U.S. banks “Outstanding” ratings from the Office of the Comptroller of the Currency.

Our Community Development Finance (CDF) Group is a
key driver of our inclusive growth strategy, one of our coresustainability thematic focus areas. Designed and implemented
with community and nonprofit partners, CDF executes
innovative transactions not routinely performed by private
investors in areas of pressing need, including:•	Preservation and development of sustainable,

multifamily affordable rental housing

IMPACT BY THE NUMBERS: 2010–2021$27Bn+

committed in community development
loans and investments•	Healthy communities•	Equitable transit-oriented development•	Economic development that supports quality jobs
•	Capital for underserved, small and rural markets

165,000+ affordable housing units funded•	Capacity building for nonprofits

Launched in 2020, the $1 billion Morgan Stanley Social Bond
accelerates this work by directing capital into affordable
housing projects that support vulnerable communities.
Through March 31, 2022, the bond supported more than
47,500 affordable housing units, with impacts delivered
to over 123,000 people. For more details and casestudies, see our 2022 Social Bond Impact Report.

$400MM+ in small-business loans

236,000+ jobs created or retained38

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2021 SUSTAINABILIT Y REPORT

2021 Community Development Finance Highlights

Keeping Housing Affordable:
New construction, preservation
and rehabilitation of affordable
housing are core components of ourcommunity development strategy
and a critical need across thecountry. Throughout the pandemic,
CDF has continued to alleviate
the growing housing affordability
crisis, financing over 80 affordable
housing developments for a totalof ~$1.8 billion in 2021. For
example, CDF provided a $35 million
loan to support a new 561-unit
development in Washington D.C.,
including 40,000 square feet ofretail space. The project is partof the mayor’s New Community
Initiative to revitalize severely
distressed subsidized housing andredevelop neighborhoods into
vibrant mixed-use communities.

Affordable Housing With
Supportive Services: We work withmission-oriented affordable housing
partners to acquire multifamily
rental properties and identify
programs to support the needs oftheir residents and the surrounding
communities. For instance,
Morgan Stanley invested $15 million
to build a new 80-unit affordable
housing development in Plattsburgh,
New York. The project combines
four residential buildings andone community building that will
include common space and offices
for 24/7 social services, including
primary and behavioral healthservices, housing case management,
employment and vocation training,and children’s services.

Responding to Natural Disasters:
When extreme weather, including
floods, hurricanes and wildfires,strikes, affordable housing
shortages can be exacerbated inaffected towns and cities. CDF
works with locally based partners toprovide financing that helps rebuild
communities after disasters, suchas the California wildfires. After the
Tubbs fire swept through Sonoma
County, destroying thousands ofhomes, including the Journey’s
End Mobile Home Park for seniorcitizens, Morgan Stanley worked
with the area’s leading affordable
housing developer, Burbank
Housing Development Corporation,
providing ~$75 million in financing
in 2021 to construct 94 new homesthat will offer affordable housing
opportunities to residents displaced
from Journey’s End as well as otherlow-income seniors.

MORGAN STANLEY

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2021 SUSTAINABILIT Y REPORTThe Morgan Stanley
Institute for
Sustainable Investing

The Morgan Stanley Institute for Sustainable Investing plays a uniquerole in our firm and sector. For nearly a decade, it has worked toaccelerate the adoption of sustainable investing and finance by fostering
innovation, empowering investors through actionable analysis anddeveloping the next generation of leaders in the field. It also drives
strategic sustainability initiatives across Morgan Stanley.
Founded in 2013 by the firm’s CEO and Chairman, the Institute ischaired by the firm’s Vice Chairman and Head of External Affairs andis guided by an advisory board of prominent leaders from business,academia and leading nongovernmental organizations.

1

2

3

Fostering innovation by leveraging
the firm’s experience and market
perspective to advance the fieldof sustainable investing.

Delivering actionable analysis
and thought leadership to informand empower investors.

Developing the next generationof sustainable investing leaders
through strategic partnerships
and programs.

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MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTIMPACT BY THE NUMBERS

414

graduate students from 87 schools in 50 countries entered
our annual Sustainable Investing Challenge, with projects
designed to make an impact in 33 countries

500+

students applied for ~6 sustainable investing fellowship
positions in New York and London

900+

sustainable finance thinkers and practitioners joined
our third annual Sustainable Investing Summit

CASE STUDYSUPPORTING
BREAKTHROUGHINNOVATION TOTACKLE POVERTY AND
PLASTIC WASTE
Siklus, a groundbreaking Indonesian startup,
operates plastic waste refill stations insupermarkets and on mobile delivery carts.
The business gives consumers a convenient way
to refill used plastic containers with products
such as detergent and shampoo while saving
money on these essentials.
Siklus is among five global innovators, ranging
from fully commercial firms to nonprofits, that
Morgan Stanley is backing through the Institute for
Sustainable Investing’s new Sustainable Solutions
Collaborative. See page 42 for more details.

MORGAN STANLEY41

2021 SUSTAINABILIT Y REPORT

Fostering Innovation
The Institute leverages Morgan Stanley’s experience and market perspective as a leading global
financial services firm to advance the field of sustainable investing.
As part of Global Sustainable Finance (GSF), the Institute partners both across the firm and withoutside stakeholders to pioneer scalable solutions and build new sustainable investing tools
and capabilities. Examples of how the Institute supports the firm’s three business segments toincubate innovative and impactful products for clients are included throughout the Solutions
and Services section.
Sustainable Solutions Collaborative
The world faces many complex sustainability challenges, fromclimate change and plastic waste to equitable health care andfood insecurity. These require large-scale systemic solutions,which is why Morgan Stanley launched the Sustainable Solutions
Collaborative in 2021. Led by the Institute, this initiative
will channel $250,000 awards to innovators engaged inbreakthrough sustainable solutions that range from commercial
to nonprofit. Recipients participate in a year-long partnershipwith the Institute. Over time, Collaborative members will bepart of a growing network of Morgan Stanley leaders andpartner organizations that facilitate cross-sector collaborationon the most pressing sustainability issues.
To identify the first five projects, the Institute consideredmore than 150 nominations from sustainability thought leadersand practitioners across a range of sectors and implemented
a rigorous screening process. The winners were chosen
based on their high potential for lasting and systemic impact.

In addition to Siklus (see page 41), the winners were:•	mPharma, a Ghana-based health tech startup that isrevolutionizing Africa’s drug supply chain by using e-commerce
tools to make health care more accessible and affordable.
•	MySOC, a project partnership between Skidmore College

and Michigan State University that harnesses unprecedented
amounts of data on soil carbon to help create a new market
working with farmers committed to sustainability.
•	SunCulture, based in Kenya, uses innovations in inclusive

finance, renewable energy and sustainable agriculture tohelp small-scale farmers make their practices more
profitable and sustainable.
•	Trees As Infrastructure (Trees AI) is an open-source

platform working to establish nature-based approaches
to urban infrastructure. It is run by U.K.-based Dark Matter
Labs, which operates across Europe.

Morgan Stanley Sustainable Investing Summit
In October 2021, the Institute hosted our third annual Sustainable Investing Summit, whereleaders across business and government explored solutions to pressing sustainability challenges.
This virtual event convened over 900 leading sustainable finance thinkers and practitioners.
The summit focused on the interconnectedness of climate change, economic inequality,
social justice and health care access—and the need for bold solutions. Attendees including
policymakers, economists, scientists, physicians, entrepreneurs and investors addressed theneed for innovation, coordinated cross-sector solutions and an end to business-as-usual
thinking. Speakers included former U.S. Vice President Al Gore, UN Special Envoy on Climate
Action and Finance Mark Carney, former U.S. Securities and Exchange Commission Chair
Mary Schapiro, Pfizer CEO Dr. Albert Bourla, and Tokyo Governor Yuriko Koike, among others.

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MORGAN STANLEY

2021 SUSTAINABILIT Y REPORT

Delivering Actionable Analysis
The Institute delivers insightful analysis to inform and empower the growing number of investors
looking to make a positive ESG impact. Our thought leadership focuses on trends driving
sustainable investing and critical thematic issues such as climate change and inclusive economic
growth. Highlights that made a strong impact on investors and other stakeholders in 2021
included the following:

Sustainable Signals

Individual Investors and the COVID-19 Pandemic

SUSTAINABLE INVESTING

Four in five investors remained focused on sustainable investing during
the COVID-19 pandemic. Although the economic downturn triggereda slight drop in interest since 2019—by 6 percentage points—we stillfind interest among 79% of all individual investors in our sample,
and all-time high interest of 99% among Millennials.
The seismic events of the last two years also shifted investors’ thematic
priorities when it comes to sustainability. Public health and support forsmall businesses surged among areas of interest, while 50% of investors
and nearly 75% of Millennial investors made investment changes—orplan to—in response to social justice movements.
At the same time, a greater portion of investors in our sample citedconcern about the financial performance of sustainable investments.
Taken together, these trends highlight a significant opportunity for
financial advisors and investment managers to proactively engage
and support individuals on their sustainable investing journeys.

FIGURE 1

52%

75%

85%
36%

52%
49%

19%
2015

Very Interested

3 Questions About Sustainable
Investment Performance Persist

MILLENNIALS

79%
38%

84%

86%

56%

48%

95%
25%

99%
42%

70%
57%

41%

38%
28%

23%
2017

2 Climate Change Remains a Key
Focus, Especially for Millennials
and Investors With a Positive
Economic Outlook

4 Opportunities Exist To Better
Support Individuals on Their
Sustainable Investing Journey

GENERAL POPULATION

71%

KEY INSIGHTS
1 2020’s Turbulence Significantly
Impacted Sustainable Investing

2019

2021

Somewhat Interested

2015

2017

Very Interested

2019

2021

Somewhat Interested

Sustainable Signals: Individual Investors and the
COVID-19 Pandemic analyzed investor behavior andthematic priorities during the turbulent events of 2020.
The survey of 800 U.S. individual investors found a 6%
dip in interest in sustainable investing, to 79% among
all investors, amid pandemic-driven economic concerns.
However, millennial interest rose by 4% over 2019 levels
to 99%, underlining the field’s strength among this key
investor group. The survey also provided insights into
how recent events have shifted investors’ sustainability
priorities. Interest in public health and small-businesssupport surged while 50% of all investors and 73% of
millennials said they had made investment changes in
response to social justice issues or planned to do so.

Sustainable Reality:
2021 Update

Sustainable Reality: 2021 Update revealed that U.S.
sustainable funds outperformed traditional peer funds
by a median of 4.3% throughout 2020 amid ongoing
economic uncertainty triggered by the global pandemic.
The gap in performance among equity and taxable bondfunds was the highest recorded since 2004, indicatingthat sustainable funds can be more reliable in times ofstress. The analysis reinforces our Sustainable Reality
findings in 2019 and 2020, adding to a growing bodyof evidence that sustainable funds can be less risky forinvestors.

For information on climate-related thought leadership, see page 32 of our 2021 Climate Report.

MORGAN STANLEY

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2021 SUSTAINABILIT Y REPORT

Developing Future Sustainable-Investing Leaders
The Institute helps develop the next generation of sustainable-investing leaders throughfellowships and strategic partnerships. Our two hallmark programs for graduate students expose
tomorrow’s financial services executives to the power of capital market solutions to address
sustainability challenges. The Sustainable Investing Fellowship places successful candidates insustainability functions at our New York City headquarters and London office. In 2021, nearly
600 students applied for seven positions. The selected candidates were placed in GSF, Equity
Research, Global Capital Markets, Wealth Management and Investment Management.

For eight years, the Kellogg-Morgan Stanley Sustainable
Investing Challenge has served as an incubator for cuttingedge ideas. This highly competitive event (see Snapshot)
invites graduate students worldwide to apply their talents
to developing financial solutions to social and environmental
challenges that can also achieve market-rate financial returns.
In 2021, more than 400 graduate students participated in thecompetition, a 34% increase from 2020. Volunteers fromacross the sustainable investing community offered theirservices as mentors and judges, helping identify 16 teams
to advance to the finals.

photo by Stephen Akpakwu

44

MORGAN STANLEY

The top prize went to the BeeBank & Brokerage team from
Oxford University for its proposal to finance beekeepers
and help stem the global die-off of honeybees. The team’s
innovative model would enable investors to support sustainable
food production by facilitating contracts, working capitaland resources to provide farmers with healthy bees for croppollination.
For the second consecutive year, the Institute andNorthwestern University’s Kellogg School of Management
also invited proposals aimed specifically at reducing plastic
waste. The prize in this category went to the European
Circular Fund team from the Frankfurt School of Finance andManagement. The team’s proposed cap-and-trade system forplastic packaging would support a loan fund for EU waste
collection, waste treatment and recycling companies.

With a proposal to financebeekeepers and practices thatconserve biodiversity, the
BeeBank & Brokerage teamsecured the top prize in the2021 Kellogg-Morgan Stanley
Sustainable Investing
Challenge.

2021 SUSTAINABILIT Y REPORT

Kellogg-Morgan Stanley Sustainable Investing Challenge
2021 COMPETITION SNAPSHOTTOTAL OF414

STUDENTSFROM87SCHOOLS

FROM

50

HOME COUNTRIESFORMING123TEAMS

TARGETING IMPACT IN

33

COUNTRIES

Students’ Home Countries

Countries Targeted for Impact

MORGAN STANLEY

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2021 SUSTAINABILIT Y REPORTFirmwide
Sustainability

Morgan Stanley’s commitment to sustainable business, climate action
and inclusive growth extends to how we run our own company.
With leadership from the top and partnership with our employees,
we integrate ESG considerations across our business practices,
operations and culture. Priorities include building a diverse andinclusive workforce, improving business resilience, and maintaining
strong governance practices and prudent risk management.

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MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTDIVERSITY BY THE NUMBERS
CASE STUDY

Global Gender Representation

29%

27%

39%

4 of 14 of ourboard directors
are womenof our officers
globally are
women6of our global
employees are
women7

U.S. Ethnic Diversity Representation8

26%

32%

Ethnically diverse officer

Ethnically diverse

BUILDING BETTER TOSHRINK OUR REAL ESTATE
FOOTPRINT
Our Build Better program helps us deliver themodern office functionality our employees expectwith lower environmental impact. Part of ourSustainability at Work strategy, Build Better targets
significant improvements in efficiency across ourglobal real estate portfolio, installing solutions
across cooling, heating and lighting that go beyond
regulatory standards, which results in a comfortableworking environment with lower resource intensity.
The program will reduce energy and natural resourceuse, waste, and emissions throughout the lifecycleof our buildings by integrating engineering, design,
project management, procurement and operations.
For example, our facilities are introducing:•	100% recycled content of carpeting andceiling tiles•	Emphasis on natural lighting and reduction of

artificial lighting whenever possible•	Low-energy filtration technology for enhanced

indoor air quality•	Smart technologies that adjust lighting, heating,cooling and cleaning services based on use
As of 2021 year-end, nearly 5 million rentable square
feet of our real estate has achieved certification
to the U.S. Green Building Council’s Leadership in
Energy and Environmental Design standard (LEED).
By 2025, we aim to certify 50% of our global
floor area.

6

Officers include Managing Directors, Executive Directors and Vice Presidents.

	Legacy Eaton Vance employees are included in all metrics.

7

U.S. ethnically diverse designations align with the Equal Employment Opportunity Commission’s ethnicity
and race categories and include American Indian or Native Alaskan, Asian, Black or African American,
Hispanic or Latino, Native Hawaiian or Pacific Islander, and two or more races.

8	

MORGAN STANLEY

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2021 SUSTAINABILIT Y REPORTOur People
Morgan Stanley’s 75,000 talented employees around the world bring diverse experiences andperspectives that enrich our culture, inform our work and drive our business. We embrace a valuesbased culture of inclusion where dedicated professionals collaborate to produce our best work.
We provide development opportunities and health and wellness resources to help our employees
reach their potential and balance work and home life. Throughout the ongoing COVID-19 pandemic,
we have made every effort to help keep our employees around the world safe.
A strong, inclusive workplace culture is core to our success. Our board of directors and its
Compensation, Management, Development and Succession (CMDS) Committee oversee our humancapital strategy. Priorities include human capital initiatives and management of culture and succession
planning, including with respect to our chairman and CEO. We continually refine our human capital
approach based on business drivers, employee surveys and the overall environment for talent.

Diversity and Inclusion
We believe that a comprehensive diversity strategy is important
to Morgan Stanley’s continued success and our ability tosupport our workforce, serve our clients and engage withthe communities in which we live and work. To this end, we
continue to deliver against a comprehensive diversity andinclusion strategy focused on our workforce, societal issues andthe marketplace.
•	Workforce: Continue to develop and invest in internal

diversity, equity and inclusion efforts to enable
Morgan Stanley to become a leader in attracting,developing and retaining diverse talent, and to createa culture of inclusion at the firm•	Society: Support underserved communities throughphilanthropy and employee engagement that addresses
inequities in education and careers, economic prosperity
and health, and helps them to grow and thrive•	Marketplace: Invest to advance economic outcomes inunderserved communities through our products, services,business practices, spending, thought leadership andconferences
Creating opportunities for all our colleagues to thrive, whileserving our clients and communities, is good for everyone
and supports our business success. In 2020, we launched
the Morgan Stanley Institute for Inclusion. Led by our
Chairman and CEO, the Institute for Inclusion’s mandate

48

MORGAN STANLEY

includes investing to advance economic outcomes inunderserved communities, strengthening these communities
through philanthropy and advising on our internal D&I efforts.
An external advisory board provides expert perspective
and constructive feedback and includes leaders fromeducation, business and nonprofit organizations as well as
representatives from Morgan Stanley’s board of directors.
For more information about our D&I policies, programs andprogress; the Morgan Stanley Institute for Inclusion; andour global diversity representation data, download ourmost recent Diversity and Inclusion Annual Report here.

CultureMorgan Stanley’s culture draws people to our firm and sets
us apart from our competitors. Our people take to heart ourcore values—Put Clients First, Do the Right Thing, Lead With
Exceptional Ideas, Commit to Diversity and Inclusion, and Give
Back. To reinforce these values across our global offices, ourCulture, Values and Conduct Committee of senior managers
provides a firmwide perspective on culture, values andconduct. The Committee’s responsibilities include identifying
focus areas, sharing best practices and overseeing initiatives
relating to culture, values and conduct (including training andenhancements to talent management, conduct risk and related
processes), and reporting to the board of directors or its
committees, as appropriate. In a 2021 survey, 90% of employees
stated that they were proud to work at Morgan Stanley.

2021 SUSTAINABILIT Y REPORTOur culture of belonging supports a professional work
environment of equal opportunity, dignity and respect. We
expect every manager and employee to recognize diverse
points of view, make decisions based on merit and lead withintegrity. Employees must follow the letter and spirit of ourCode of Conduct and their region’s nondiscrimination andanti-harassment policy. All U.S. employees also complete a
mandatory annual course on maintaining a culture ofrespect. We strongly encourage our employees to report any
workplace concerns using the channels described on page 59.
One measure of a successful business culture is retaining
talented and skilled employees. Similar to external trends,
we saw an increase in voluntary attrition in 2021 due to thecompetitive labor market. By leveraging data through thebiennial engagement and exit surveys, we identified various
themes to be addressed to help combat attrition, retain highperformers and remain the employer of choice. We delivered
on a number of key initiatives, including executing on healthand safety initiatives, investing in employee well-being,
competitively compensating our staff and continuing tofocus on diversity, inclusion and belonging. It is clear theMorgan Stanley brand remains strong, as we experienced
record hiring in 2021.

BY THE NUMBERS

Global Voluntary Attrition in 2021

12%

During the year, we continued to collaborate on cultural
integration with E*TRADE and Eaton Vance following theacquisitions in 2020 and 2021. We are working closely withour counterparts in both businesses to share information
on each firm’s history and culture, and have senior leaders
welcome our new colleagues.
For more information on our approach to human capitalmanagement, see page 32 of our 2022 Proxy Statement andpages 6–8 in our 2021 10-K.

MORGAN STANLEY49

2021 SUSTAINABILIT Y REPORTSupporting Well-Being
KEEPING OUR EMPLOYEES AND COMMUNITIES SAFEDURING COVID-19

As the global COVID-19 public health crisis persisted throughout
2021, we continued to put our people’s safety first with arange of country-specific programs designed to support andprotect them. These range from free telemedicine and COVID-19
testing, treatment and vaccination clinics to subsidized backup
family care, educational discounts and increased flexibility foralternative work arrangements.
Throughout the year, our Chief Medical Officer and various
taskforces continued to update employees on topics such as
testing, vaccinations, mental health resources and returning towork safely. Our human resources team also maintained our
COVID-19 Response Line to answer colleagues’ questions andcoordinate contact tracing and case management
PROMOTING HEALTH AND WELL-BEING

Morgan Stanley offers our employees and their families
comprehensive benefits, including preventive programs andsupport when serious health issues arise. These include
medical, dental and vision coverage; tax-advantaged flexible
spending and health savings accounts; and critical illness,
accident, disability and life insurances. We also provide generous
family and medical leave, short- and long-term disability,
and sick days, and in 2020, we introduced an enhanced mental
health benefit for employees and their dependents.
Prioritizing our mental health and well-being has never been
more crucial as Morgan Stanley’s global community navigatesthe ongoing pandemic. To support employee health and wellbeing, we provide benefits and programs on health education,
stress management, preventive care and chronic condition
support. Additionally, onsite health and well-being facilities
are available in key locations across the world. These include
wellness and quiet rooms in many locations for meditation,prayer or yoga. Around the world, we celebrated World
Mental Health Day with virtual global events to raiseawareness, provide connection and reduce stigma. Thousandsof employees took part digitally through individual connections,panel discussions, online tools and toolkits developed inpartnership with the Morgan Stanley Alliance for Children’s
Mental Health (see box to the right).
In October 2021, we created the Morgan Stanley Global
Well-Being Board, assembling senior leaders from across thefirm who will:•	Provide visible, sustained senior sponsorship and focus on

overall well-being, encompassing employees’ positive
physical, mental, social and financial health•	Build greater openness, awareness and literacy to help remove

the stigma often associated with seeking mental health care
50

MORGAN STANLEY•	Address systemic issues related to well-being and mental

health, including work design and organizational culture,
to drive positive health outcomes
While the firm’s current benefits and incentives arecomprehensive, we have taken a closer look at our offerings tobest meet the needs of our diverse workforce and enrich theemployee experience. In December 2021, we announced a slateof global employee well-being enhancements to reflect notjust our values and culture, but above all, our commitment toemployees and their families. These included financial wellness,family support and physical well-being improvements.
Additionally, foundational to good health is having a primarycare doctor who delivers preventive care, teaches healthy
lifestyle choices, identifies and treats common medical
conditions, and makes referrals to specialists, when needed.
Many employees have postponed care during COVID-19, do nothave a regular doctor, or need a cost-effective and easy way to
get quick answers to urgent medical issues.
To address these gaps in the U.S., Morgan Stanley is rolling out
a new concierge primary care benefit in the U.S., which offers
top-quality care for adults and children at 100-plus locations
and 24/7 virtual care.

Pressing Pause for Mental Health
Awareness Month
During Mental Health Awareness Month in May, we encouraged
our employees to take a collective pause to care for themselves
and their families. Throughout the month, we hosted virtual
activities ranging from panel discussions to practical tools and tips
for connecting with co-workers and improving personal well-being.
Highlights included panels with mental health experts from
Headspace and Lyra, virtual fitness and meditation classes, e-cards
to send colleagues, and a healthy sheet-pan cooking class. In
addition, we introduced toolkits for our managers to support
their teams and our U.S. families, developed in partnership withmembers of the Morgan Stanley Alliance for Children’s Mental
Health to support their children.

2021 SUSTAINABILIT Y REPORT

Performance Management
Core to our success is our ability to recruit and retain thebrightest and best. We design our performance, pay, promotion
and succession processes to engage and reward talented andcommitted individuals and reinforce our culture and values.
Annual employee evaluations include feedback from managers
and colleagues on performance, conduct, risk behavior
and contributions to our culture, all of which factor into
compensation and promotion decisions. In 2021, with wellbeing top of mind for our employees, we added a performancequestion to assess and hold managers accountable for how
they support their employees’ health and well-being.
RESPONSIBLE COMPENSATION

Morgan Stanley is committed to responsible compensation
programs that support the firm’s strategy, culture and values
over the long term. We pay incentive compensation based on
individual performance and firm performance against financial
and nonfinancial goals set by the board of directors. Each
year, the board and executive management team evaluate ourstrategy and refine performance goals and priorities to help
ensure long-term management alignment.
Our compensation programs seek to deliver pay for sustainable
performance, attract and retain top talent, align withshareholder interests, and mitigate excessive risk-taking.
Senior management together with the board’s Compensation,
Management Development and Succession (CMDS)
Committee oversee:

The CMDS Committee sets executive officer compensation
after year-end, when full-year firm performance is known. In
2021, 75% of our CEO’s incentive compensation was deferredover three years and subject to clawback, 100% of deferredincentive compensation was delivered in equity awards, and
60% of incentive compensation was delivered through future
performance-vested equity awards.
Executives with responsibility for sustainability, including but
not limited to the Vice Chairman and Head of External Affairs,
the chief sustainability officer and the global head of corporate
services, are evaluated against sustainability performance, goals
and targets.
Shareholder feedback has informed our approach to corporate
governance, disclosure and compensation in recent years.
For more information, including on our 2021 named executive
officer compensation awards, see page 76 of our 2022 Proxy
Statement.
ADVANCING PAY EQUITY

Attracting, retaining and advancing diverse talent is a priority
for Morgan Stanley, and our policies and practices, including
those on pay, reflect and promote that commitment. Ourcompensation programs are competitive within our industry
and help ensure equitable rewards for all employees. For
more information, see the Compensation Philosophy andCommitment to Equitable Pay Practices section of ourDiversity and Inclusion Annual Report.

•	Policies and procedures for funding and allocating incentive

compensation, and the use of discretion in such awards toindividuals• Processes for identifying “material risk-taker” employees•	Controls to mitigate the risk of rewarding inappropriate

conduct and unsatisfactory performance•	Processes for incentive compensation clawback andcancellation features
In 2021, an average of 68% of total compensation was variable
for material risk-takers, of which 42% was subject to cancellation
or clawback provisions. Where we uncover conduct contrary
to our policies, disciplinary action may include cancellation andclawback of compensation, changes to promotion decisions,
reduction of cash bonuses or termination of employment.

MORGAN STANLEY

51

2021 SUSTAINABILIT Y REPORT

Risk Management
Risk is an inherent part of our businesses and activities. We believe effective risk management is vitalto the success of our business activities. Accordingly, we have an Enterprise Risk Management (ERM)
framework to integrate the diverse roles of risk management into a holistic enterprise structure
and to facilitate the incorporation of risk assessment into decision-making processes across the firm.

We have policies and procedures in place to identify, measure,monitor, escalate, mitigate and control the principal risks
involved in the activities of the Institutional Securities, WealthManagement and Investment Management business segments,
as well as at firm level. The principal risks involved in ourbusiness activities include market (including non-tradingrisks), credit, operational, model, compliance, cybersecurity,
liquidity, strategic, reputational and conduct risk. Strategicrisk is integrated into our business planning, embedded in theevaluation of all principal risks and overseen by the board.

We also plan and practice for extraordinary events at a sector
level and share threat information as appropriate with peers,
vendors and relevant government agencies.
Specialist teams support our Global Business Continuity
Management program and standards, including Technology,
Risk Management, Information Security and Corporate
Services. Dedicated governance and risk committees, theboard’s Operations and Technology Committee, and senior
management all help oversee the program.

The cornerstone of our risk management philosophy is the
pursuit of risk-adjusted returns through prudent risk-taking
that protects our capital base and franchise. This philosophy isimplemented through the ERM framework. Five key principles
underlie this philosophy: integrity, comprehensiveness,
independence, accountability and transparency.
Our approach to business continuity management,
environmental and social risk management and human rights,
and developments in 2021 are summarized on page 53. For
more information on Risk Management, including governancepriorities, see our 2021 Form 10-K and our 2022 Proxy
Statement.
NAVIGATING COVID-19 RISKS AND RETURN TO WORK

Operational Resilience
Unpredictable disruption to business operations is a growing
threat in a globalized and networked world. Morgan Stanley
is prepared for such incidents, from cyberthreats to natural
disasters. We maintain a robust global Business Continuity
Management program to protect our firm and clients, managed
by our Firm Resilience team. This expert team coordinates
measures across business units and functions to help maintainkey services during events that impact our business operations
and activity. Their efforts prioritize the physical safety of ourstaff and include controls to protect and maintain our realestate and technology.
The Fusion Response and Recover Center provides 24/7
global coverage to monitor and manage disruptive incidents,and our three core businesses have continuity plans in place
for critical business processes and essential personnel.

52

MORGAN STANLEY

Our operations have run smoothly throughout the global
disruption caused by COVID-19 due to the resolve of
our employees and strength of our Business Continuity
Management. To inform our decisions, we closely monitor
developments related to COVID-19 as well as guidance fromthe U.S. Centers for Disease Control and Prevention (CDC),
the World Health Organization (WHO), and national andlocal governments.
We have taken a cautious and phased approach to workplace
return that ensures first and foremost the health and safetyof our employees and their families. Our Business Resilienceand Human Resources team designed and implemented a“Vaccine Policy Change Checklist” that enabled the rollout ofbuilding-entry vaccine policies globally. Depending on location,
this mandated either a vaccine or test, vaccine-only entry,
or proof of vaccination.

2021 SUSTAINABILIT Y REPORTADDRESSING ENVIRONMENTAL AND SOCIAL RISK

Morgan Stanley’s due diligence and risk management processes
are designed to identify, assess and address potentiallysignificant environmental and social issues that may impact
the firm, our clients or other stakeholders. Our Environmental
and Social Risk Management (ESRM) Group oversees ESRMrelated policies, provides internal subject matter expertiseon environmental and social risk, conducts due diligence on
relevant transactions, engages with stakeholders, monitors
emerging risks and developments in partnership with thebusiness units and GSF, and helps train employees.

Morgan Stanley regularly engages external and internal
stakeholders on environmental and social topics, and wereview our policies annually to reflect our strategy andkey developments. The ESRM Group’s annual review of theEnvironmental and Social Policy Statement is conductedwith senior business unit representatives, internal control
groups and GSF, and resulted in amendments to thestatement including:•	Providing additional details on ESRM’s approach, including

to Enhanced Due Diligence•	Clarifying our approach to specific carbon-intensive sectors•	Emphasizing client engagement with regard to climate

commitments

SUMMARY OF MORGAN STANLEY’S 2021 ENVIRONMENTAL AND SOCIAL POLICY STATEMENT

SCOPE

GOVERNANCESECTOR APPROACHESCROSS-SECTOR APPROACHESThe Policy is applied globally
across the following types oftransactions:• Lending•	Debt and equity underwriting• Private placements•	Investment banking andcapital markets advisory
assignments•	Investment management
activities related to private
equity, private real assets
and private credit investing•	O ther transactions or
activities as applicable andappropriate

The Policy Statement isreviewed annually. The resultsof the review are presented
to the Global Franchise
Committee, and material
amendments are presented
to the Nominating andGovernance Committee ofthe board of directors for
its consideration.

Morgan Stanley has tailoredapproaches to certain sectors
and activities including:•	Power Generation (Coal,
Hydropower, Nuclear)•	M ining (Thermal Coal Mining,
Metals mining)•	Oil and Gas (Arctic Oiland Gas, Oil Sands, Ultra
Deepwater Oil and Gas,
Shale Oil and Gas, Oil and
Gas Transportation Pipelines,
Liquefied Natural Gas (LNG)
Export)• Forestry• Palm oil

We also have tailoredapproaches to certain crosssector environmental andsocial issues including:• Climate change•	Human rights• Indigenous Peoples•	B iodiversity, critical habitats
and critical cultural heritage

MORGAN STANLEY53

2021 SUSTAINABILIT Y REPORTREVIEWING TRANSACTIONS

As outlined in the Environmental and Social Policy Statement,
the ESRM Group and our business units review transactions
that could result in potential environmental and social issues.
When a particular environmental or social issue is identified,
we conduct enhanced due diligence, including on issues suchas human rights, adverse impacts on Indigenous Peoples,and management of greenhouse gases and other emissions.
Transactions that carry potential franchise risks associatedwith environmental and social issues may also be escalated tosenior management and/or the Global and Regional Franchise
Committees that oversee franchise risk to the firm.
For example, to assess Morgan Stanley’s potential participation
in a bond offering by a chemical company, the ESRM Group
worked with the business unit to conduct comprehensive due
diligence given the potential environmental impacts of thecompany’s operations and use of its products. Our assessment
included meetings with company representatives and reviewof the company’s framework and track record to address
impacts associated with energy use, water consumption andwaste management, as well as its material reduction initiatives.
Following internal reviews involving senior management,
Morgan Stanley determined that the company’s efforts tomitigate potential risks were sufficient and decided toproceed with the transaction.
BY THE NUMBERS

2021 Transactions by Industry
Reviewed by the Environmental andSocial Risk Management GroupINDUSTRY

2021

Basic Materials
EnergyFinancial Institutions
Health Care
Industrials
Pharmaceuticals
Power and Utilities
Real Estate
RetailServices
Transportation

41
88
28
18
79
13
110
32
42
88
21

TOTAL

54

MORGAN STANLEY560

In another instance, a potential power client sought advisory
services to help refinance an existing loan facility. The ESRM
Group evaluated several environmental and social metrics
associated with one of the company’s facilities, as well as its
stakeholder engagement approach, given concerns raised by
the local community. The review did not confirm a sufficiently
robust stakeholder engagement framework—thereby leading
us to decline pursuing the opportunity.
ASSESSING CLIMATE RISK

Morgan Stanley recognizes the significant potential forclimate change to impact the global economy and our clients,
investments, operations, employees and local communities.
Effective action on climate change will require a broadtransformation of sectors and economies, and management of
impacts to workers and communities. Due to the complexity ofaddressing climate change in developed and emerging economies,a transition to a low-carbon economy necessitates joint efforts
by governments, businesses and individuals. For this reason,
Morgan Stanley committed in 2020 to reach net-zero financed
emissions by 2050.
See our 2021 Climate Report for more in-depth informationon our approach to climate risk management.
MANAGING HUMAN RIGHTS RISK

Morgan Stanley is committed to protecting and advancing humanrights in our business and throughout our supply chain. Our
approach is guided by leading frameworks, including the U.N.
Universal Declaration of Human Rights and the U.N. Guiding
Principles on Business and Human Rights.
We conduct business operations in ways that aim to respect,
protect and advance the full range of human rights. We expect
our suppliers to follow appropriate policies and practices toensure they are not complicit in human rights abuses. Our
Supplier Code of Conduct includes our Modern Slavery and
Human Trafficking Statement, and a global cross-functional
working group monitors compliance across our supply chain.
As outlined in the Environmental and Social Policy Statement,
Morgan Stanley will not knowingly engage in transactions
where there is evidence of direct involvement in modern
slavery—such as forced labor, human trafficking, or harmful or
exploitative forms of child labor. We conduct enhanced diligence
for investments with potential heightened human rights risk
and, based on the findings, may escalate them to the Global or
Regional Franchise Committees and/or senior management.
Read the Morgan Stanley Modern Slavery and Human Trafficking
Statement here, the Morgan Stanley Human Rights Statement
here, and the Environmental and Social Policy Statement here.

2021 SUSTAINABILIT Y REPORT

Cybersecurity
Our business and industry face an increasingly complex online
threat environment. To withstand this challenge, we invest
in leading cybersecurity and fraud-prevention technology
and employ world-class talent to lead our Cybersecurity
organization. The firm’s efforts focus on protecting our people,
property, products, services and brands by preserving theconfidentiality, integrity and availability of information andthe safe operation of our technology systems.
Morgan Stanley’s board of directors and its Operations andTechnology Committee oversee the firm’s global Cyber andInformation Security Strategy. Our Information Security
Program is designed to protect the business, enable securedelivery of client services, adjust to the evolving threat
landscape and meet regulatory expectations. In addition, we
employ a wide array of policies, procedures and technologies
for safeguarding our technology and sensitive data.
We have multiple expert teams in place to prepare for, respondto and recover from disruptive incidents and events across ourglobal operations. These teams include:•	Information Security Incident Management and Investigations,which helps protect the firm against misuse of sensitive
information and systems by employees and contractors.
•	Our Cyber Incident Response Team, which tracks threats andmitigates potential risks posed by computer security incidents
on the firm’s systems, providing 24/7 detection and response.
•	T he Fusion Resilience Center, which prepares for, responds

to and analyzes operational threats and incidents, ranging
from cybersecurity, fraud and general technology disruptions
to weather events, terrorist attacks, geopolitical unrest andpandemics.
•	Our Fraud, Threat Hunt and Cyber Analytics teams, which

use data science, analytics and threat hunt techniques toreduce the risk of Morgan Stanley assets being compromised,stolen or misappropriated.
Each employee plays a valuable role in helping us manage
cyber threats and we maintain a robust global training programon cybersecurity risks and requirements.

INDUSTRY COLLABORATION

Collaboration across the financial services industry and withgovernment agencies is critical to combating cyber threats. To
facilitate the exchange of threat information, Morgan Stanleyis actively engaged in leading industry organizations including
the Financial Services Information Sharing and Analysis
Center. We are one of eight founding members of the Analysis
and Resilience Center, a nonprofit, cross-sector organization
working to mitigate risk to critical U.S. infrastructure fromexisting and emerging threats.
We also maintain relationships across the U.S. government. For
example, Morgan Stanley is a founding member of the New YorkFinance Threat Exchange, an intelligence-sharing partnership
between the FBI and major U.S. financial services organizations.
Around the world, we are members of the U.K.’s Cyber
Information Sharing Group of industry, government andlaw enforcement partners and the Japan Financial Services
Information Sharing and Analysis Center. We are also partners
in the National Cyber Security Centre’s Financial Services
Information Exchange in the U.K.
To develop tomorrow’s cyber-leaders and widen access to theskills they require, we partner with iMentor, Girls Who Code,
NPower, local universities and other nonprofit organizations.
Our Resiliency Fusion Center also partners with the U.S. Marine
Corps to provide fellowships with our cybersecurity team.

Data Security and Client Privacy
Morgan Stanley’s success depends on our reputation, which
in turn relies on our ability to keep client information andassets confidential and secure. Our business maintains physical,
technical and administrative safeguards that help protect
the confidentiality, integrity and availability of our clients’
information. Our robust global privacy and data-protection
policies and procedures govern the collection, storage, access,use and disclosure of such data.
Morgan Stanley also informs our clients and employees about
how and why it collects personal information. For more
information, see our Privacy Pledge.

MORGAN STANLEY

55

2021 SUSTAINABILIT Y REPORT

Governance and Business Ethics
Our reputation is critical to our goal of being the world’s first choice for financial services. For decades,
Morgan Stanley’s strong governance and reputation for integrity have reduced business risk andprovided a foundation for success. Our core values underpin this culture, support our sustainability
strategy and drive everything we do. When we Put Clients First, Do the Right Thing, Lead With
Exceptional Ideas, Commit to Diversity and Inclusion, and Give Back, we seek to meet client needs,
deliver value for investors, and support a sound and sustainable global financial system.
Leadership From the Top
Morgan Stanley is deeply committed to strong and ethicalgovernance and to further strengthening the inclusive culturethat sets us apart from peers. This begins with our diverse
14-member board of directors, of whom 11 are independent and
4 are women. Our directors come from backgrounds across theprivate sector, government, academia and public policy arenas,
and bring a global perspective. Their collective experience
guiding large, complex organizations as executive leaders orboard members brings a diversity of qualifications and skills
well suited to guiding our business and long-term strategy.
We also greatly value the perspectives and insights of ourexternal stakeholders as we navigate business, economic, andsustainability challenges and opportunities (see page 57).
For information on sustainability governance and firmwide
integration, see Our Approach, page 8.

THE MORGAN STANLEY BOARD OF DIRECTORSDIVERSE AND INTERNATIONAL BOARD

4

femaledirectors

4ethnicallydiversedirectors

DIRECTORS’ SKILLS ALIGN WITH COMPANY
BUSINESS MODEL AND STRATEGY

50%

of board isgender and/or
ethnically diverse

Cybersecurity/Technology/
Information Security
Accounting/Financial Reporting
ESG / Sustainability
Current or Former CEO

5

directorsborn outsideof the U.S.

63.9

years is the averageage of board
upon election at
annual meeting5

new directors in
the last three years(since beginningof 2019)

Risk Management56

MORGAN STANLEY

8
8
9
9

Financial Services
Human Capital Management
Academia/Government/Public Policy/Regulatory Affairs
Global/International Perspective

Data and metrics as of the 2022 annual shareholders’ meeting and based on
characteristics self-identified by directors.

7

Public Company Governance

11
12
12
12
13

2021 SUSTAINABILIT Y REPORT

Stakeholder Engagement
Sustainability is a shared endeavor. We benefit from the varied
perspectives and insights of our stakeholders and engage them

STAKEHOLDER GROUP

in many ways on an ongoing basis. The table below describes
these strategies and forums as well as 2021 highlights.

APPROACH TO ENGAGEMENT

2021 EXAMPLES•	Ongoing or annual dialogue with institutional investors

Our GSF, Diversity & Inclusion and ESRM teams
joined Investor Relations in its engagement with
top Morgan Stanley institutional shareholders.
Discussions covered climate change, diversity,
firmwide strategy, governance and compensation
practices, among other topics.

•	A nnual sustainability report focused on investor-

relevant information•	Diversity and Inclusion Annual Report

Shareholders•	Climate (TCFD) Report•	Responses to inbound questionnaires and surveys•	Events and analysis on sustainable investing andfinance topics•	Collaboration on new product development to meetclient ESG needs•	Dialogue with key clients focused on ESG issues•	Responses to inbound questionnaires, requests for

proposals, surveys

Clients•	Client satisfaction channels•	Employee networks, events and campaigns•	Company intranet, which includes articles and otherresources•	Employee surveys

GSF hosted Exploring Innovations to Prevent
Plastic Waste, a webinar for employees featuring
the Ellen MacArthur Foundation, to discuss
innovations to prevent plastic waste.
The New York Employee Sustainability Forumlaunched Sustainability at Home, a page on
the firm’s intranet, which serves as a platform
for employees to share tips, ask questions andengage in peer-to-peer dialogue about how tolive more sustainably at home. The information
is particularly topical as employees continue towork from home throughout the pandemic.

Employees•	M organ Stanley events•	One-on-one or small-group dialogues on sustainability

topics, risks or emerging issues•	Sustainability reporting and other disclosures

Non-Governmental
Organizations (NGOs)
and Civil Society

In October 2021, our Institute for Sustainable
Investing hosted its third Sustainable Investing
Summit, which drew over 900 participants,
including many clients of the firm, to hear fromsustainability thought leaders and practitioners
on how to advance critical, interconnected issues
including climate change mitigation, better accessto health care and the creation of more equitablesocio-economic opportunities. Keynote speakers
included former Vice President Al Gore, UN
Special Envoy for Climate Action and FinanceMark Carney, and Dr. Albert Bourla, CEO of Pfizer,
among others.

In partnership with GSF, the ESRM Group engaged
with a range of non-governmental and civil society
organizations on environmental and social topics,
including biodiversity and community impacts.

•	Direct involvement in collaborative initiatives andmembership organizations (see Key Memberships
and Affiliations on page 58)

MORGAN STANLEY57

2021 SUSTAINABILIT Y REPORTKEY MEMBERSHIPS AND AFFILIATIONS58

MORGAN STANLEY

2021 SUSTAINABILIT Y REPORT

Ethical Business Conduct
Our Code of Conduct and Code of Ethics and Business reinforce
our focus on integrity, guiding the day-to-day behavior of
approximately 75,000 employees worldwide (see also
Our Culture). It is mandatory for every new hire, and every
employee annually, to certify that they understand our Codeof Conduct and will follow its provisions on ethical behavior.
To reinforce its messages and foster a sense of community,
we invite new recruits to attend culture panels with seniorleaders in each region.
Financial crimes undermine public trust in our sector. We takeall reasonable measures to prevent them, including mandatory
awareness training for employees. Robust risk-based policies,
procedures and internal controls help guard against misuseof our products and services for money laundering, terrorism,
bribery or other criminal activity. We require employees toreport any legal or ethical concerns to a supervisor, our Human
Resources or Legal and Compliance teams, or an anonymous
Integrity Hotline operated by an independent vendor. We takeallegations of misconduct seriously and prohibit retaliation
against anyone raising a concern in good faith.

ANTI-CORRUPTION AND BRIBERY

Morgan Stanley prohibits all forms of bribery and corruption,and has implemented policies, procedures and internal controls
reasonably designed to comply with applicable anti-corruption
laws and regulations in the jurisdictions where we operate.
Our Global Anti-Corruption Policy, updated annually, lays out
clear rules to mitigate corruption risk, and all our employees
receive training at least once a year. We also provide additional,
targeted training for relevant employees. In addition, we
conduct risk-based monitoring and testing to encourage andassess employee compliance. For more information on ouranti-corruption program, see our Code of Conduct.

Corporate Political Activity
Morgan Stanley’s Corporate Political Activities Policy
Statement is approved by the board’s Nominating andGovernance Committee, and sets out our policies on U.S.
political contributions, lobbying activities and trade association
participation. In accordance with the policy, we prohibit
corporate contributions at the U.S. federal, state or local levels.

We also expect our suppliers to meet our core values andhigh standards for doing business. Our Supplier Code of
Conduct lays out our requirements for human and labor rights,
environmental protections, and ethical business practices.

MORGAN STANLEY59

2021 SUSTAINABILIT Y REPORTAppendix:
SASB Index

The Sustainability Accounting Standards Board (SASB) guidance forInvestment Banking, Commercial Banking and Asset Management
helps inform the content, narrative and data included in this report.
The following table highlights sections of the report and other public
disclosures that include information in line with SASB’s metrics,
as of the year ending December 31, 2021. We are committed toproviding investors with useful, relevant and meaningful sustainability
information, within the context of our businesses, and may evolve
our disclosure on these topics over time.

60

MORGAN STANLEY

2021 SUSTAINABILIT Y REPORTSASB CODE

SASB METRICMORGAN STANLEY RESPONSE1

IB-330a.1
AC-330a.1

Percentage of gender and racial/ethnic group representationfor (1) executive management, (2) non-executive
management, (3) professionals and (4) all other employees

See “Human Capital” on page 6 of our Annual Report on Form
10-K for the year ended December 31, 2021 (2021 Form 10-K),
as well as our recently published Diversity and Inclusion
Annual Report.

IB-410a.2(1) Number and (2) total value of investments and loans
incorporating integration of environmental, social andgovernance (ESG) factors, by industry

Teams across the firm invest in and lend to institutions togenerate environmental and social benefits. Examples and KPIs
are provided in the Solutions and Services section, pages 22–39.
For information on transactions that were reviewed inaccordance with our Environmental and Social Policy Statement:(industry and number), see the Environmental and Social Risk
Management (ESRM) section, pages 53–54.

IB-410a.3

Description of approach to incorporation of ESG factors ininvestment banking and brokerage activities

Institutional Securities group’s sustainability activities,
pages 23–27.
ESRM review process and number of transactions referred
for review, page 54 and our Environmental and Social Policy
Statement.

IB-510a.1
CB-510a.1
AC-510a.1

Total amount of monetary losses as a result of legal
proceedings associated with fraud, insider trading, anti-trust,anti-competitive behavior, market manipulation, malpractice,or other related financial industry laws or regulations

Material legal proceedings for the firm are disclosed on pages
117 and 145 of our 2021 Form 10-K.

FN-IB-550a.2
N-CB-550a.2

Description of approach to incorporation of resultsof mandatory and voluntary stress tests into capital
adequacy planning, long-term corporate strategy
and other business activities

We conduct various scenario analyses and stress tests, including
the Federal Reserve’s Comprehensive Capital Analysis andReview and other stress tests for market, credit and liquidity
risks, as appropriate.
For more information, see pages 42 and 49 as well as additional
pages throughout our 2021 Form 10-K.
With respect to climate change, Morgan Stanley is conducting
scenario analyses in the two major categories identified by
TCFD: transition risk and physical risk. For more information,see our 2021 Climate Report.

IB-510a.2
CB-510a.2
AC-510a.2

Description of whistleblower policies and procedures

The Raising Legal and Ethical Concerns and Reporting
Misconduct section of our Code of Conduct defines the firm’s
policies and procedures.

IB-510b.4

Description of approach to ensuring professional integrity,
including duty of care

Our Code of Conduct and Code of Ethics and Business describe
our ethical business practices, guiding the day-to-day behavior of
our employees worldwide. We require every employee to certify
his or her adherence to, and understanding of, the Code of Conduct
when they join the firm, and on an annual basis thereafter.

IB-550a.1
CB-550a.1

Global Systemically Important Bank (G-SIB) score,by category

1, Banking Organization Systemic Risk Report at December 31,
2021 (FR Y-15).
For more information see page 48 of our 2021 Form 10-K,
which describes how the G-SIB buffer is determined, and page
4 of our Basel III Pillar 3 Disclosures Report for the quarterly
period ended December 31, 2021, which discloses our G-SIB
capital surcharge of 3%.

	If a metric is not addressed in the report, we have provided links to public disclosures that include relevant information.

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SASB METRICMORGAN STANLEY RESPONSE1

IB-550b.1

Percentage of total remuneration that is variable forMaterial Risk Takers (MRTs)

Our MRT policies and procedures align with regulatory principles
and requirements, and are overseen by the Compensation,
Management Development and Succession Committee of theboard. In 2021, on average, 68% percent of total remuneration
was variable for material risk takers. See page 51 for more
information.

IB-550b.2

Percentage of variable remuneration of MRTs to which
malus or clawback provisions were applied

Of the 68% of total compensation that was variable for MRTs,
42% was subject to cancellation or clawback. See page 51 formore information.

IB-000.A(1) Number and (2) value of (a) underwriting, (b) advisoryand (c) securitization transactions

Investment banking volumes:
Completed Mergers and Acquisitions: $1,090 billion
Equity and Equity-Related Offerings: $117 billion
Fixed Income Offerings: $365 billion
For more information see page 30 of our 2021 Form 10-K.

CB-230a.2

Description of approach to identifying and addressing
data security risks

Overview of our activities regarding data security risk, page 55.

CB-240a.1(1) Number and (2) value of loans and investments
made as part of our Community Reinvestment Act
program designed to promote small business andcommunity development

The cumulative values of transactions as part of our Community
Development Finance program are noted below:
2010–2021:• $ 27Bn+ committed in loans and investments• $ 400MM+ in small business loans

For more information see the Community Development Financesection, pages 38–39.
CB-410a.1

Commercial and industrial credit exposure, by industry

Institutional Securities Loans and Lending Commitments byindustry, see page 62 of our 2021 Form 10-K.

CB-410a.2

Description of approach to incorporation of environmental,social and governance (ESG) factors in credit analysis

Global Sustainable Finance partners closely with Firm Risk
Management (FRM), including Credit Risk Management,
to integrate climate change considerations into our risk
management processes and governance structures. For more
information, please see our 2021 Climate Report.

CB-000.B(1) Number and (2) value of loans by segment: (a) personal,(b) small business and (c) corporate

Small-business loans that incorporate sustainability factors
are discussed in the Community Development Finance section,
pages 38–39.
Our Investment Banking activity, which includes corporate
lending, is discussed in the Finance and Advisory Services
section, page 26, with select transactions highlighted on
pages 24–25.

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SASB METRICMORGAN STANLEY RESPONSE1

AC-270a.3

Description of approach to informing customers about
products and services

Each business unit is responsible for setting and managing
robust policies and processes related to their marketing
activities, which are subject to supervisory review in accordancewith applicable promotion laws and regulatory obligations.
We aim to manage risks in marketing and sales by enforcing thefollowing guidelines:• C ommunications to clients and the public must be fair andbalanced, without exaggerated or misleading statements.

• E mployees must use approved marketing materials andmessaging systems when conducting the firm’s business.

• F inancial Advisors must follow a compliance manual ofinternal sales practice standards, as well as adhere to allapplicable laws and regulations.

• T he firm monitors customer complaints. These are dealt within accordance with relevant internal policies, and business,legal and/or compliance personnel take action as needed.

AC-410a.1

Amount of assets under management, by asset class, that
employ sustainable investing approaches

Wealth Management
Investing with Impact Client Assets by Asset Class ($Bn):• Equity: $43• Fixed Income: $9• Cash Equivalents: $2• Other2: $16• Total: $70
Investment Management
Sustainable Fund AUM3 by Asset Class ($Bn):• Active Fundamental Equity $46• Global Fixed Income $10• Global Liquidity $4• Private Credit and Equity $0.2
• Solutions and Multi-Asset $2• Total: ~$61

AC-410a.2

AC-410a.3

Description of approach to incorporation of ESG factors
in investment and/or wealth management processes andstrategies

Overview of our Wealth Management processes, pages 28–31.
For more information, see our Investing with Impact brochure.

Description of proxy voting and investee engagement
policies and procedures

Overview of Investment Management engagement andactivities, pages 32–37.

Overview of Investment Management processes, pages 32–37.
For more information, see our Sustainable Investing Policy.

In addition, see Morgan Stanley Investment Management’s
Proxy Voting Policy and Procedures.
AC-000.A(1) Total registered and (2) total unregistered assets undermanagement (AUM)

Total Client Assets, which includes no registration distinction,
see page 24 of our 2021 Form 10-K.

AC-000.B

Total assets under custody and supervision

Wealth Management fee-based client assets (only), see page 33
of our 2021 Form 10-K.

2	Other includes Third-Party Multi-Asset products, Custom Graystone + Dual Contract and Alternative Impact Products

	The AUM figures referenced in this section relate to our ‘Sustainable Core’ and ‘Sustainable Objective and Impact’ AUM (as defined on page 37)
of Legacy MSIM strategies plus total Calvert Research and Management AUM.

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FORWARD-LOOKING STATEMENTS

Certain statements in this report may be “forward-looking statements.”
These statements are based on management’s current expectations
and are subject to uncertainty and changes in circumstances. Thesestatements are not guarantees of future results or occurrences. Actual
results and financial conditions may differ materially from thoseincluded in these statements due to a variety of factors, including,among others, global socio-demographic and economic trends, energy
prices, technological innovations, climate-related conditions andweather events, counterparty financial health, insurance applicability,
legislative and regulatory changes, and other unforeseen events orconditions, and the precautionary statements included in this report

and those contained in Morgan Stanley’s filings with the Securities andExchange Commission (SEC). Any forward-looking statements madeby or on behalf of Morgan Stanley speak only as to the date they are
made, and Morgan Stanley does not undertake to update forwardlooking statements to reflect the impact of circumstances or events
that arise after the date the forward-looking statements were made. In
addition, while this report describes potential future events that may besignificant, the significance of those potential events should not be readas equating to materiality as the concept is used in Morgan Stanley’s
filings with the SEC.

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The information and opinions in this report were prepared by
Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC andtheir affiliates (collectively hereafter, “Morgan Stanley”).
This report does not provide individually tailored investment advice.
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be deemed as a recommendation to buy or sell. Securities discussed inthis report may not be suitable for all investors. It should not be assumed
that the securities transactions or holdings discussed were or will be
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evaluate particular investments and strategies, and encourages investors
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Historical data shown represents past performance and does notguarantee comparable future results. Furthermore, this report may
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Third parties, including charities, mentioned within this material
are not affiliated with Morgan Stanley. It is important to note that
Morgan Stanley is not guaranteeing the review or diligence of thecharities or philanthropic opportunities listed herein. Any mention of
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If you choose to support any of the charities or philanthropic endeavors
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Morgan Stanley will not receive referral fees from any of the charities
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MORGAN STANLEY|2018 SUSTAINABILIT Y REPORT

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article, Morgan Stanley is not implying an affiliation, sponsorship,endorsement, etc., with the third party or that any monitoring is being
done by Morgan Stanley of any information contained within the article
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is as of the date of the article when it was written and is subject
to change without notice. Past performance is not a guarantee of
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U.N. Sustainable Development Goals: The content of this publication has
not been approved by the United Nations and does not reflect the viewsof the United Nations or its officials or Member States. See https://www.
un.org/sustainabledevelopment/sustainable-development-goals for moredetails on the Sustainable Development Goals.
Investing in the market entails risk of market volatility. The value of all
types of investments may increase or decrease over varying time periods.
Equity securities’ prices may fluctuate in response to specific situations
for each company, industry, market condition and general economic
environment. Companies paying dividends can reduce or cut payouts
at any time.
Bonds are subject to interest rate risk. When interest rates rise, bondprices fall; generally, the longer a bond’s maturity, the more sensitive it
is to this risk. Bonds may also be subject to call risk, which is the risk thatthe issuer will redeem the debt at its option, fully or partially, before
the scheduled maturity date. The market value of debt instruments may
fluctuate, and proceeds from sales prior to maturity may be more or lessthan the amount originally invested or the maturity value due to changes
in market conditions or changes in the credit quality of the issuer.
International investing entails greater risk, as well as greater potential
rewards, compared to U.S. investing. These risks include politicaland economic uncertainties of foreign countries as well as the riskof currency fluctuations. These risks are magnified in countries withemerging markets, since these countries may have relatively unstable
governments and less-established markets and economics. REITs’
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information on characteristics of the bond, use of proceeds, a descriptionof applicable project(s) and/or any other relevant information about thebond, please reference the offering documents for the bond.

Alternative investments are often speculative and include a highdegree of risk. Investors could lose all or a substantial amount of theirinvestment. Alternative investments are suitable only for eligible,
long-term investors who are willing to forgo liquidity and put capital atrisk for an indefinite period of time. They may be highly illiquid and canengage in leverage and other speculative practices that may increase thevolatility and risk of loss. Alternative investments typically have higher
fees than traditional investments. Investors should carefully review andconsider potential risks before investing.
Private Funds (including hedge funds, which are private equity funds)
often engage in speculative investment techniques and are only suitable
for long-term, qualified investors. Investors could lose all or a substantial
amount of their investment. They are generally illiquid and not tax
efficient, and have higher fees than many traditional investments.
The investor should note that funds that invest exclusively in one sector
or industry involve additional risks. The lack of industry diversification
subjects the investor to increased industry-specific risks.
Investment returns will fluctuate so that an investor’s shares whenredeemed may be worth more or less than original cost. Investors
should carefully consider the investment objectives and risks as well
as charges and expenses of a mutual fund or exchange-traded fund(ETF) before investing. To obtain a prospectus, contact your Financial
Advisor or visit the fund company’s website. The prospectus contains
this and other information about the mutual fund or ETF. Read theprospectus carefully before investing.
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may be lower or higher than a portfolio that is more diversified or where
decisions are based solely on investment considerations. Because ESG
or sustainability criteria exclude some investments, investors may not
be able to take advantage of the same opportunities or market trends as
investors that do not use such criteria.
ESG strategies that incorporate impact investing and/or ESG factors
could result in relative investment performance deviating from otherstrategies or broad market benchmarks, depending on whether suchsectors or investments are in or out of favor in the market. As a result,
there is no assurance ESG strategies could result in more favorable
investment performance.
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