Since 2019, Morgan Stanley Investment Management has been refining its Sovereign ESG Methodology to enhance the evaluation of countries' sustainability performance in sovereign bond investments. The approach is designed to identify nations with strong ESG practices or positive improvements while avoiding biases against developing countries by considering their development stage.
The framework emphasizes a comprehensive assessment of sustainability momentum, addressing data lag and rewarding countries on a positive trajectory. It acknowledges the limitations of ESG data and highlights the importance of qualitative insights and active engagement with policymakers for a more complete understanding of sustainability risks and opportunities.
Anuj Gulati, Managing Director and Global Head of Fixed Income ESG Strategy & Research, along with Mariana Jordao, Vice President and Fixed Income ESG Research Analyst, are leading this initiative. They emphasize that accounting for regional dynamics, income disparities, and policy contexts can aid forward-looking investment decisions.
"ESG ratings are relative and subjective," the firm states. "There is no assurance that a portfolio will achieve its investment objective." Risks associated with fixed-income securities include credit risk, interest rate risk, market risk, liquidity risk, among others. These risks are influenced by economic events such as natural disasters or political unrest.
The document also underscores that forecasts provided are speculative and may not predict future performance accurately. It advises investors to seek independent legal and financial advice before making investment decisions.
Morgan Stanley Investment Management clarifies that this material is for informational purposes only and does not constitute an offer or recommendation to buy or sell securities. The views expressed do not reflect those of all investment personnel at Morgan Stanley Investment Management.
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