Many individuals and institutions would like to focus their investments on boosting environmental impact without giving up potential financial return.
Figuring out how to do this can be daunting.
Last week, Morgan Stanley Wealth Management’s Investing With Impact platform introduced a framework to transform the dialogue around climate change and the debate over fossil fuels into an actionable investment plan.
The Climate Change and Fossil Fuel Aware Investing Tool Kit provides a roadmap for Morgan Stanley financial advisors to help clients customize an investment approach to incorporate climate change and fossil fuel awareness into their portfolios.
It includes a primer that focuses on climate change and fossil fuel aware investing.
In addition, it lays out various avenues to this type of investing and guidance on how to implement these approaches.
“The framework presented in the Tool Kit helps to clarify the different approaches to climate change and fossil fuel aware investing, and serves as a catalyst for action by providing a lens for portfolio construction that maintains a consistent, balanced focus on both impact and financial goals,” Lily Scott Trager, director of investing with impact for Morgan Stanley Wealth Management, said in a statement.
The framework offers a variety of approaches that can be used individually or together, according to Morgan Stanley.
One approach is for investors to reduce or eliminate exposure to companies that produce coal, oil and gas or nuclear energy, or ones that own significant fossil fuel reserves.
Another is for investors to maintain select exposure to the energy sector by investing in companies that reflect industry-leading environmental practices compared with their peers.
Investors can also focus on opportunities across asset classes to invest in themes related to climate change and fossil fuel awareness.
Among these are energy efficiency, renewable energy, energy storage and distribution, and alternative transportation such as electric vehicles.
Finally, shareholder engagement can make a portfolio potentially less vulnerable to environmental risk factors that could strand fossil fuel assets in a range of sectors, leaving investors exposed to unanticipated writedowns, devaluations or conversion to liabilities.
As shareholders, investors can drive positive environmental change by voting proxies.
They can also invest in third-party strategies that use the power of their collective assets to influence corporate behavior.
Morgan Stanley Wealth Management’s Investing With Impact platform, launched in 2012, now offers more than 130 investment products capable of delivering positive environmental and social impact.
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