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RI Q&A: Audrey Choi: leading Morgan Stanley’s $10bn sustainability charge

RI talks with the former journalist and Clinton advisor heading up the US bank’s Institute for Sustainable Investing.

Responsible Investor (RI)

What led you personally to be interested in sustainability?

Audrey Choi
I believe in sustainability in the broadest sense: environmental and social sustainability underpinned by financial and economic sustainability. I worked as a journalist in the Dow Jones group (Choi was a bureau chief and foreign correspondent for The Wall Street Journal) looking at business drivers and economics. Then, I worked in the Clinton administration on policy and public/private partnerships. (Choi served in senior policy positions at the White House, Commerce Department and the Federal Communications Commission. In the White House, she was chief of staff of the Council of Economic Advisers, and domestic policy advisor to the vice president). I’ve also worked in the non-profit sector. The work at Morgan Stanley is a combination of those experiences. We’re getting towards nine billion people on the planet and in the next decades there will be extreme demand curves in natural resources, food, water, housing, education and healthcare. If you want to solve these big challenges you have to have the public and private sectors out there in the community working in concert for scaleable long-term solutions. I’ve been with Morgan Stanley since 2007, and for a number of years we’ve been exploring how wealth management, asset management, and capital markets can make the biggest difference in advancing social goals and positive investment outcomes.Responsible Investor

Responses to the announcement from people I speak to in the sustainability/ESG/finance world have tended to be polarised from the pragmatic (that’s great news, moves the issue forward, leadership), to the cynical (what took them, why now, it’s reputation/brand management, small beer for Morgan Stanley): what would you say to both sides?

Audrey Choi
I see this coming from a place of conviction where the private sector plays a serious role. I, and the Institute at Morgan Stanley, have this fundamental philosophy that sustainable investing can only be achieved if you are doing it in a sound, pragmatic way. As our CEO James Gorman himself said: “this isn’t CSR, this is about our core business.” You only get large-scale private capital in sustainability if it’s part of real capital mobilisation in financial services. Increasingly we think the biggest potential for financial products is in these opportunities and challenges that are ahead of us.

Responsible Investor

What would you say to the sceptics?

Audrey Choi
I would say look at the very concrete things that we are planning on doing. We’ve made a commitment that we are going to get to $10bn of client assets in our Investing with Impact Platform, where clients source best-in-class

investment opportunities with impact as well as risk adjusted financial returns. We’ve also made what I think is a very exciting $1bn commitment to investing in quality, affordable housing as part of strong, robust communities. We are also trying to build new awareness that sustainability can very much be achieved as part of a smart, long-term view on quality investing.

Responsible Investor

Can you speak more about how this will work across Morgan Stanley’s business lines?

Audrey Choi
We are partnering very closely with wealth management, (Morgan Stanley’s network of financial advisors serving a wide range of retail and high-net worth clients, as well as some endowments and foundations). The Investing with Impact Platform is about investing in financial products that are attractive from an economic and sustainability/positive impact standpoint. At the moment, we are trying to increase the number of products available, and to guide our financial advisors to know what the best products are for their clients’ goals. We’re trying to take a lead role in encouraging the conversation between financial advisors and clients about how they should think about sustainability products or how they can integrate sustainable investing into their whole portfolio if they so desire. In our capital markets business, we’ve underwritten the largest ever offering of green bonds this year, which is a very powerful example of combining capital market skills with sustainability. Within Morgan Stanley Investment Management (the $360bn AUM manager of equities, fixed income, alternatives, money market funds, etc), James Gorman announced that the long-only and alternatives businesses have committed to creating new, institutional-quality, sustainability-oriented products. The investment management division has also signed the PRI.Responsible Investor

One of your three priority areas in the Institute is thought leadership: can you talk more specifically about that?

Audrey Choi
We are scoping this out at the moment. Our equity research division will be doing more on sustainable and responsible investing. We recently brought on an equity analyst dedicated to the area. We also really want to delve into the places where large-scale private capital can really change the inflection point on some of the big challenges I mentioned earlier, and I say delve because it’s a work in progress. We also want to build a field of practitioners and have created the Sustainable Investing Fellowship at Columbia Business School, both to understand sustainability but also the day-to-day realities of a large financial institution.

Responsible Investor

Another priority is partnerships with the public, private and non-profit sectors: can you give some examples?

Audrey Choi
One example would be in the Sustainable Communities Initiative where we will be working closely with organisations like NCB Capital Impact and various public sector programmes for affordable housing because you need the on-the-ground expertise. When we go to invest in affordable housing construction, we want that to be tightly integrated with critical community services like affordable healthcare, quality public transportation and fresh and affordable foods, so that what you are building is much more than a place to live, but rather a thriving community for families.

Responsible Investor

You’ve set a goal of $10bn in total client assets through Morgan Stanley’s Investing with Impact Platform: what’s the hoped time-frame for that and who do you see as investing?

Audrey Choi
It’s a five-year goal from a base of about $2bn now. We’ve seen good and steadily growing interest from clients.