New Morgan Stanley Report Challenges Misperceptions Regarding Sustainable Investing and Performance

NEW YORK, March 24, 2015 /3BL Media/ – Although some investors may believe sustainable investing requires a financial sacrifice, a new report from the Morgan Stanley Institute for Sustainable Investing finds that investing in sustainability has usually met and often exceeded the performance of comparable traditional investments, both on an absolute and risk-adjusted basis, across asset classes and over time. 

“We believe sustainable investing will be a key in the mobilization of private capital towards addressing global challenges, but the growth and development of this space remains hampered by a lingering perception that sustainable investments require a financial trade-off.  Our review addresses the investment performance concern head-on, and the findings are very positive,” said Audrey Choi, CEO of the Morgan Stanley Institute for Sustainable Investing.

The Sustainable Reality report involves a review of 10,228 open-end mutual funds and 2,874 separately managed accounts over the last seven years, and highlight findings include:

• Sustainable equity mutual funds met or exceeded the median return of traditional equity funds for 64% of the time periods examined¹;
• Sustainable equity mutual funds also had equal or lower median volatility for 64% of the time periods examined¹;
• For the longest time period (seven years trailing, 2008-2014), sustainable equity mutual funds met or exceeded median returns for five out of six different equity classes examined (for example, large-cap growth)¹; and
• Long-term annual returns of the MSCI KLD 400 Social Index, which comprises firms scoring highly on environmental, social and governance (ESG) criteria, exceeded the S&P 500 by 45 basis points, between its inception in 1990 to the end of 2014^1,2.

A survey of individual investors released last month by Morgan Stanley demonstrates why these latest findings are of particular importance for sustainable investing.  According to the Sustainable Signals survey, investors appear to place a premium on sustainability yet believe sustainable investments require a financial sacrifice: 

• Nearly three quarters (72%) of those surveyed believe that companies with good ESG practices can achieve higher profitability and are better long-term investments; but
• At the same time, 54% believe that sustainable investing involves a financial trade-off.

“Sustainable investing presents the opportunity for individuals and institutions to align their investments with their values, but there are clearly many investors who have reservations over whether sustainable investing will require them to sacrifice investment performance,” said Choi.  “Ultimately, we believe that sustainable investing is simply a smart way to invest, and our review shows preconceptions regarding subpar performance are out of step with reality.”

For more information, please see Sustainable Reality: Understanding the Performance of Sustainable Investment Strategies and Sustainable Signals: The Individual Investor Perspective.

The Morgan Stanley Institute for Sustainable Investing maximizes capital to build a more sustainable future – seeking both competitive financial returns and positive social and environmental impact.  The Institute is dedicated to accelerating mainstream adoption of sustainable investing by developing industry-leading insights and scalable finance solutions to address global challenges.  For more information about the Morgan Stanley Institute for Sustainable Investing, visit www.morganstanley.com/sustainableinvesting.

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing investment banking, securities, investment management and wealth management services.  With offices in more than 43 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals.  For further information about Morgan Stanley, please visit www.morganstanley.com.

¹ Past performance is not a guarantee of future results.

² An index is unmanaged and not available for direct investment.

©2015 Morgan Stanley Smith Barney LLC and Morgan Stanley & Co LLC, members SIPC.

CRC 1155040 03/2015

Media Relations Contact: Matt Burkhard, 212.761.2444