Anthony Rochte, Morgan Stanley managing director, global head of ETFs, joined senior responsible investment strategy specialist Lenore Reiner and Calvert Research and Management chairman John Streur to discuss global leadership trends in asset management, digging into ESG.
Moderated by Reiner, the panel kicked off with a discussion of the six new ETFs launched by Morgan Stanley. “Our clients told us they want active management, but they want it in an ETF wrapper.” 250 of 400 ETFs launched last year were actively managed. Despite accounting for 15% of flows, active management is a mere 5% of total AUM in the ETF universe.
Addressing Morgan Stanley being criticized as being late to the party when it comes to ETFs, Rochte countered with the question, “How long is the event?”
“It’s important to recognize that ESG is operational,” Streur said, noting that though ESG is facing political blowback, widespread global risk is real and ESG is built to mitigate that. ESG’s political critics have scoffed that it’s “woke,” which Streur sees as missing the point. “We think about operational excellence and real long-term sustainability.”
Given the polarized climate, advisors face a unique challenge in presenting how companies are managing risk through ESG. “The question should be, ‘Are there business innovations that are actually happening that you want to invest in that are consistent with your values?’”
Sixty-five percent of net inflows in European ETFs went to ESG ETFs. “In Europe, a majority of flows were to ESG,” noted Rochte. Though U.S. firms might not duplicate that, Rochte believes it’s a notable trend.
“Women are interested in investing this way,” added Reiner. She pointed out that over 65% of women investors feel misunderstood by their advisors.
Pivoting to greenwashing, Streur pushed for investors to read prospectuses and find out exactly what they are investing in. He added, “What makes Calvert different is that we have our own research teams.” This access to proprietary data allows Calvert to drive impact and sidestep greenwashing claims.
Rochte shared two funds that he think showcases Calvert and Morgan Stanley well. The Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF (CDEI ) not only gives investors a reasonable price, but two basis points are contributed to diversity and inclusion aspects that line up with Morgan Stanley’s values. Meanwhile, the Calvert Ultra-Short Investment Grade ETF (CVSB ) offers an active approach to bonds.
“There’s a huge business case for DEI,” Streur said, noting that workplaces are becoming increasingly diverse. Companies that fail to incorporate women and minorities into the workforce are leaving behind talented, skilled workers. He also noted that more women and minorities are getting degrees.
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