Morgan Stanley Doubles Down on ESG Despite the Politics

Morgan Stanley has picked an interesting moment to press ahead with expanding its offering of ESG-themed funds.

Earlier this month, the New York-based investment bank introduced six ESG products. The equity and fixed-income exchange-traded funds are managed by Calvert Research and Management, a leader in environmental, social and governance investing that Morgan Stanley acquired in 2021 as part of its purchase of Eaton Vance Corp.

Morgan Stanley’s decision is particularly notable given the increasing pushback against ESG by Republican politicians, including some potential presidential aspirants, and their fossil-fuel industry donors.

John Streur, Calvert’s chairman, accepts that the political environment is fraught. But he said “we’re feeling pretty good” about demand for the new products. The firm had net fund inflows last year, even as stock and bond markets recorded their worst year since the financial crisis of 2008.

“ESG is all we do and we believe we have a better investment strategy than anyone else in the marketplace,” Streur said.

And ESG isn’t going away, Streur said. In fact, more companies are focused on reducing their exposure to financially material environmental, workplace and corporate governance risks than ever before, he explained.

“It’s not the greatest timing for ESG,” said Eric Balchunas, an ETF analyst at Bloomberg Intelligence. “Flows have flat-lined with energy prices up and the anti-ESG backlash gaining momentum.”