Morgan Stanley – Crypto and Carbon

Morgan Stanley – Crypto and Carbon

The intersection of Counterpoint Global’s focus on disruptive technologies
and Sustainability Research has resulted in the insight that recent Blockchain
technologies have an opportunity to play a role in decarbonizing the global
economy. While the market is currently focused on the near-term emissions
from the energy intensive mining practices of cryptocurrencies like Bitcoin, our
research helps us understand the potential energy efficiency improvements
from emerging technologies like proof of stake (explained below). In addition
to better contextualizing the risks, our research has highlighted how Blockchain
technologies have unique capabilities that can enable an interoperable
marketplace for voluntary carbon offsets. We believe the creation of a global
marketplace to enable price discovery for varying offset quality is an essential
tool to use market forces to decarbonize society.
Display 1: Can blockchain technology enable a global interoperable voluntary carbon offset
trading marketplace?

Dollar Flow

Marketplace
Bringing Supply and
Demand together
Quality Spectrum

Tokenization
Putting carbon
credits on to chain

Supply

Demand

Corporate
Buyer

Individual
Buyer

$1000/Ton
$500/Ton
$100/Ton
$1/Ton

Offset Flow

Source: Morgan Stanley Investment Management. For illustrative purposes only. Information shown is to illustrate how
blockchain technology could enable a global interoperable voluntary carbon offset trading marketplace.

CRYPTO AND CARBON: GLOBAL INTEROPERABLE VOLUNTARY OFFSET MARKETPLACE ON CHAIN

The Market Opportunity
THE GLOBAL PROBLEM: The world emits roughly 51 billion tons of greenhouse gas emissions per year.1 Most parts
of our economy create emissions, including manufacturing (31%), energy production (27%), agriculture and land
use (19%), and transportation (16%). Scientific experts from United Nations agencies estimate that even if all
nations implement their pledges to reduce carbon emissions, this scale of output puts the world on track for a 1.8°
Celsius (C) warming,2 above the 1.5 °C target set by the Paris Agreement entered into force in 2016.
ADDRESSING THE PROBLEM: The

global movement to decarbonize the economy is gaining momentum. Almost
every country has endorsed the Paris Agreement and many for-profit companies have set targets to achieve
net zero emissions. But a unified strategy on how to achieve these aspirational targets does not exist at either
a country or a company level. Decarbonization will require a massive reduction in our emissions, and some
segments of the economy have an existing strategy. For example, efforts are underway to replace electricity
generation based on fossil fuels with alternatives such as solar and wind. By contrast, companies in some
industries, including cement, steel, plastic production and aviation, will find it hard to reduce their carbon
emissions substantially. They will require offsets to counteract their output. There are simply no alternative
technologies available today that are low in carbon output and economically feasible.
THE OFFSET ECONOMY: Carbon offsets refer to the reduction or removal of greenhouse gas (GHG) emissions to

compensate for emissions that occur elsewhere. Remarkably, there is no marketplace for global carbon where emitters
can purchase offsets from those sequestering carbon. There is no centralized leadership to create a consensus global
standard. As a result, the market is complex and chaotic. Some emerging verification standards exist, such as Verra who
has certified over 1,800 Verified Carbon Standard projects, but none have achieved the scale to span isolated regional
exchanges and create an interoperable global marketplace.3
OFFSET BUYERS: There

are two primary types of buyers for offset credits. The first is the “compliance” market,
where buyers have a legal mandate to offset their carbon emissions. The second is the “voluntary” market, a group
that elects to pursue targets of net carbon reduction. The compliance market is more established. These buyers
purchased roughly 11 billion tonnes of carbon dioxide equivalent (CO2e) at a value of approximately $850 billion
in 2021, representing an increase of 164% from 2020 (European Union’s Emissions Trading System accounted for

Source: Rhodium Group as of 2020, as referenced in How to Avoid a Climate Disaster, by Bill Gates, February 16, 2021.
Source: International Energy Agency, November 6, 2021.
3
Source: Verra.org, July 12, 2022.
1

2

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90% of global value, with €683 billion of transaction value in 2021).4 The voluntary market today is much smaller,
making purchases of 300 million tons CO2e at a value of roughly $1 billion. While smaller than the compliance
market, the voluntary market is growing significantly faster and is estimated to reach more than $100 billion of
volume per year by 2030.5 This trend is supported by likely regulations such as carbon taxation. These regulations
seek to reduce the cost difference between high- and low-emissions alternatives, which is expected to lower
green premiums.
There is vast variability in cost and quality on the supply side. For example, the seller of a
carbon credit can generate an offset by avoiding cutting down trees at a cost of a few dollars per credit or by
spending up to $1,000 per credit to use 100% green energy to suck carbon from the air using solid sorbent direct
air capture (DAC) systems and store it miles underground for centuries. The primary dimensions of quality are
additionality, permanence, efficiency and verifiability.
OFFSET SELLERS:

•

ADDITIONALITY:

High-quality credits are said to have “additionality,” which means that the sequestration
happens only if incremental funding from selling credits is available. (A 2016 study released by the European
Commission and carried out by the Oko-Institut estimates that 85% of offset projects were not additional. In
other words, the sequestration would have occurred as a continuation of business as usual without the carbon
marketplace.)

•

PERMANENCE:

•

EFFICIENCY:

•

VERIFIABILITY:

Each sequestration method has a different estimated duration on how long the carbon is
captured (Reforestation generally is expected to last for decades while captured and stored carbon can last
centuries).
The amount of carbon that is released in the process of sequestering reduces net carbon
removal efficiency. (Afforestation and Reforestation can be greater than 95% efficient, with the primary
wastage being the forest management, while biochar is estimated to be 25% efficient, where each ton
removed requires 0.75 tons to be emitted.)6
Traceability and measurability vary between the different methods. (A captured and stored
ton of carbon is relatively cheap to document while measuring soil-based sequestration of regenerative
farming practices is labor intensive and estimated by lower precision survey work.)

While there are public sector groups like parties of the United Nations Climate Change Conference addressing
Article 6 (the Paris Agreement’s rulebook governing carbon markets), and private sector initiatives like
Taskforce on Scaling Voluntary Carbon Markets and Carbon Meta-Registry focused on the issues, the scale and
complexity of the task is immense. The lack of interoperability between marketplaces, as well as standards that
vary, means a company that sequesters carbon is unable to add their credit to a liquid pool of global supply. As a
consequence, carbon credits are not priced to reflect the proper underlying quality. There are currently 68 carbon
pricing mechanisms around the world, including 36 carbon taxes and 32 emissions trading schemes.7 In the
compliance market prices range from below $5 to above $100 per ton depending on the country and region.8 In
the voluntary market, prices can range from less than $1 per ton to above $50 per ton.9
OPPORTUNITY SCALE: The

market opportunity has the potential to be significant. If 85% of the global emissions
of 51 billion tons are reduced through decarbonization strategies, more than 7 billion tons will need to be offset.
Assuming a cost of $100 per ton to sequester emissions suggests a $765 billion market. This is larger than the
software sector today. While we expect a market will eventually be created to meet this demand and hence
capture the opportunity, further development through existing systems is anticipated to be slow.
Game-Changing Technology
Blockchain is in effect a decentralized database. Four innovative applications built on foundational blockchain
technology are relevant to the opportunity in the market for carbon offsets:

Source: Refinitiv and Reuters, January 31, 2022.
Source: Ecosystem Marketplace, November 10, 2021.
6
Source: National Academies of Sciences, Engineering, and Medicine. Negative Emissions Technologies and Reliable Sequestration:
A Research Agenda. 2018.
7
Source: The World Bank, Carbon Pricing Dashboard, 2022.
8
Source: The World Bank, Carbon Pricing Dashboard, 2021.
9
Source: Ecosystem Marketplace, Global Carbon Markets Data Intelligence and Analytics Dashboard, 2021.
4
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CRYPTO AND CARBON: GLOBAL INTEROPERABLE VOLUNTARY OFFSET MARKETPLACE ON CHAIN

Cryptocurrencies such as Bitcoin use blockchain as an enabling technology, but
cryptocurrencies and blockchain are distinct. Bitcoin and other cryptocurrencies are an application
of blockchain that enables a digital store of value in a transaction system that does not rely on trust.
Cryptocurrencies create incentives for members to participate in the management of the ecosystem. For
instance, the entities that provide the computing power to process the transactions in the Bitcoin network are
compensated with new Bitcoins. This creates a self-sustaining ecosystem.

1.  CRYPTOCURRENCY:

Most cryptocurrencies are fungible assets. For instance, all Bitcoins are
the same and owners can use them interchangeably for transactions. Some blockchains enable the creation
of tokens that have individually unique properties and traits. These are called non-fungible tokens (NFTs).
NFTs are now best known as a way to collect and speculate on the value of unique pixelated images, but
this enabling technology can add any type of unique asset to a distributed database. For example, one of
the leading cryptocurrency decentralized exchanges, Uniswap V3, uses NFTs to represent positions in its
liquidity pools.

2.  NON-FUNGIBLE TOKENS (NFTS):

A traditional company is a centralized entity where
decisions are made through the use of governance structures. The management team runs the business, the
board of directors is responsible for oversight and strategy, and shareholders elect the board. A decentralized
autonomous organization (DAO) is managed through transparent rules run on a computer program and
controlled by the crowdsourced voting of DAO members. The holders of DAO governance tokens cast votes to
determine the actions of the DAO. Unlike traditional corporations, governance token holders may not have any
formal ownership of the DAO or rights to its assets. DAOs can sell governance tokens or give them to people or
entities that are strategic to the success of the enterprise. This enables community ownership and incentivizes
participation.

3.  DECENTRALIZED AUTONOMOUS ORGANIZATIONS (DAOS):

The first version of cryptocurrencies were applications based on proof of work (PoW), where
the prover was incentivized with rewards to generate specific computational output that others could verify.
This output required substantial computer processing and was thus energy intensive. Beyond extensive energy
needs, these early PoW applications were too slow and could not meet the performance demands of newer
applications. Rather than earning from PoW, the next generation of network participants in cryptocurrencies
earn through proof of stake (PoS). This process allows owners to earn additional cryptocurrency by staking

4.  PROOF OF STAKE:

Display 2: How carbon trading on chain could work:
Demand

Project A
Re-forestry Project
4 tons
Certificate
20 years
Medium additionality
On-going Verification

Project B
Direct Air Capture
2 tons
Certificate
100 years
High additionality
Verified

TTT

Quality Spectrum

Supply

T

TT
Tokenization
Putting carbon
credits on to chain

$1000/Ton

T T

$500/Ton
$100/Ton
$1/Ton

T T T T

Corporate Buyer
High Quality Focused
Mandated buyer
Individual Buyer
Lower
Quality Focused

Marketplace
Bringing Supply and
Demand together

Dollar Flow

Offset Flow

1) Pricing quality serves as a demand pull to create more high-quality projects (currently demand outstrips supply)
2) Overtime the quality floor is expected to be raised by regulations as corporate buyers specifically buying low quality will
likely be seen as greenwashing their net-zero commitment
Source: Morgan Stanley Investment Management. Information shown is for illustrative purposes only.

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their assets in exchange for the privilege of validating network transactions. PoS is faster and much more
energy efficient than PoW. It also disincentivizes bad behavior.
Technology Colliding With an Opportunity
The thesis is that blockchain-enabled applications of NFTs, DAOs and PoS have the potential to enable the
creation of a global carbon offset marketplace that can decarbonize the economy through market forces.
A ton of carbon removed is currently a commodity. But there is a massive
difference in quality between verifiable, long-duration and net-efficient activities such as direct air capture
using green energy and harder-to-verify activities in forestry conservation. A carbon removal credit that is put
on chain and made into an NFT can be priced to reflect the underlying quality of the sequestration. Matching
price and quality can unleash the necessary market forces to incentivize the generation of high-quality credits.
Over time, the market can demand different quality minimums.

1.  NFTS ADDRESS QUALITY VARIANCE:

When a company buys a carbon credit today it has to trust that the ton
sequestered was sold only once and not counted twice. In certain cases, there also has to be trust that the
company that purchased the offset will retire the credit and not resell it. Since NFTs are programmable, they
can be coded to be retired, or “burn,” after consumption. This verifies sole sale. This burning allows purchasers
of offsets to see the amount of carbon credits consumed, allowing them to compare prices and compete
effectively. This also allows market participants to speculate more easily on the pricing of varying quality. For
example, they can lock in current pricing by forward buying credits and not burning them.

2.  NFTS ADDRESS TRACEABILITY:

DAOs
create an incentive for community participation and ownership. DAOs can issue tokens that they can sell to
participants on the supply and demand side. Marketplaces that scale successfully follow common patterns.
Liquidity attracts incremental liquidity, which can create positive feedback that could result in a leader takingmost market. DAOs have an advantage over traditional marketplaces owned by centralized organizations
because they can enable participation, hence driving incremental demand and supply.

3.  DAOS CAN HELP FACILITATE A GLOBAL MARKETPLACE TO BRING TOGETHER SUPPLY AND DEMAND:

One of the primary constraints on the offset
economy is the upfront cost to start sequestration projects and the ongoing costs to verify carbon credits. For
instance, regenerative farmers already sequester carbon but generally are not compensated for it because the
cost of verification is too high. DAOs can use funds from treasury to pay for farmers to adopt regenerative
agriculture practices and the on-going verification costs. The credits created through that project can then be
sold on the owned exchange by mandate, allowing for the initial upfront investment to be recovered. This new
source of revenue for regenerative farmers would attract the incremental farmer to adopt regenerative practices.

4.  DAOS CAN HELP ADDRESS THE PROBLEM OF FUNDING OFFSETS:

5.  DAOS AND NFTS CAN HELP PROVIDE PROGRAMMATIC LIABILITY MANAGEMENT: Offset

sellers can receive
payment over time utilizing verification vesting coded into the NFT, incentivizing continued land maintenance,
for instance. The DAOs that issue the NFTs can serve as the liable entity should an offset seller change their
practices or if the sequestration is proven impermanent. The DAO can hold a reserve of NFTs or US Dollarlinked coins in treasury as insurance to compensate buyers should the initial sale prove impermanent. Having the
liability transferred to a DAO lowers the risk of corporate buyers who fear reputational harm from mistakenly
buying low-quality credits.

6.  CRYPTOCURRENCY ALLOWS PARTICIPANTS TO CASH IN AND CASH OUT: The

global cryptocurrency
infrastructure and service providers enable buyers to put cash into the system to acquire carbon offset NFTs
while carbon sequesters can take cash out of the ecosystem after linking their verified carbon offsets to NFTs.

The Impact
The average price of a carbon offset in the voluntary market was estimated to be $3.37 per ton in 2021, up from
$2.50 in 2020, this low price reflects the perceived quality and disaggregated demand pools.10 The academic
consensus is that the price per ton needs to be $100 or greater to sizably incentivize the scalable decarbonization
projects to transform the global economy to net-zero emissions. We believe the creation of a global interoperable
marketplace with price discovery and variance to reflect quality is a systemic way to use market forces to
incentivize decarbonization on a mass scale.

10

Source: Ecosystem Marketplace, Global Carbon Markets Data Intelligence and Analytics Dashboard.

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CRYPTO AND CARBON: GLOBAL INTEROPERABLE VOLUNTARY OFFSET MARKETPLACE ON CHAIN

Display 3: How DAOs can help facilitate the scaling of on-chain carbon offset marketplaces
DAO:
Can earn fees, fund supply, incentivize community
participation with ownership and manage the liability

Supply

Project B
DAC
Project

Project C
Regenerative
Ag Project

Vested

Quality Spectrum

Project A
Re-forestry
Project

Certificate T
Vested

Start up
capital

Tokenization
Putting carbon
credits on to chain

Dollar Flow

$1000/Ton

Demand
Corporate Buyer
High Quality Focused
T T

$500/Ton
$100/Ton
$1/Ton

Marketplace
Bringing Supply and
Demand together

Individual Buyer
Lower Quality Focused
T T T T

Corporate Strategic
Ownership stake
in the ecosystem

Liability Holder

1) Entity will earn fees for tokenization and marketplace transactions
2) Overtime marketplace and tokenization fees can help fund projects to bring more supply on to chain
3) Entity can manage liability to insure purchases with a carbon or dollar reserve, and pay out to supply providers with vesting
as their permanence obligations are met
4) Community participation can be incentivized with ownership of the DAO via utility-like tokens
Source: Morgan Stanley Investment Management. Information shown is for illustrative purposes only.

While it is certainly possible that a global marketplace will be controlled by a centralized set of exchanges
(similar to how equities or bonds are traded) we believe the complexity, scale and variance of this market
makes these emergent technologies particularly useful. Blockchain technologies can also help address missing
capabilities to enable mass adoption such as programmatic verification, liability management and a funding
mechanism for offset creation. In our view, building a marketplace now that factors in quality variance enables
society to be ready to scale if the will and budgets materialize to act, and a liquid marketplace appropriately
pricing qualitative factors such as permanence is likely to result in carbon credits over time that have both quality
scores issued by third-party rating agencies and the integration of standard time scales (ton sequestered for 10
years, for example).
The thesis is that the path to disruption will start at a niche segment of the high-end market. Specifically,
buyers that demand the highest quality will purchase the best-quality carbon credits. We are seeing that some
sophisticated large technology corporate buyers that want to meet their net-zero commitments in an authentic
way are helping to jumpstart this market. Such activity particularly at the high end of the market will likely
create an incentive to bring more supply into the market and help emergent technologies like DAC get to scale.
Buyers, in turn, will establish price differences between highest- and lowest-quality credits. Over time, we expect
quality will rise either as the result of regulations or by carbon sequesters moving up the quality spectrum in
response to incentives.
If the trading volume over these marketplaces grows to meet the increasing demands of buyers looking to meet
net-zero targets, it is likely that the service layers of tokenization and the marketplace itself will likely become
valuable entities. Counterpoint Global will be looking for potential investments that could capture some of this
value, derivatively we believe there should be investment opportunities that get created as a result of having a
liquid marketplace, such as companies that create high quality offsets cost efficiently.

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Risk Considerations

There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the
possibility that the market values of securities owned by the Portfolio will decline and that the value of Portfolio shares may
therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural
disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is
difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose
money investing in this Portfolio. Please be aware that this Portfolio may be subject to certain additional risks. In general, equities
securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks
such as currency, political, economic, market and liquidity risks. The risks of investing in emerging market countries are greater
than risks associated with investments in foreign developed countries. ESG Strategies that incorporate impact investing and/
or Environmental, Social and Governance (ESG) factors could result in relative investment performance deviating from other
strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. As
a result, there is no assurance ESG strategies could result in more favorable investment performance. Cryptocurrency (notably,
Bitcoin) operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. It is not backed by
any government. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency. Cryptocurrency may
experience very high volatility.

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CRYPTO AND CARBON: GLOBAL INTEROPERABLE VOLUNTARY OFFSET MARKETPLACE ON CHAIN

Counterpoint Global
New York
YEARS OF
EXPERIENCE

YEARS
WITH FIRM

YEARS
WITH TEAM

Lead Investor, Head of Counterpoint Global
Head of Counterpoint Global ~ New York, Technology
Health Care
Business Services, Software
Consumer
Consumer, Industrials, Technology (ex Software)
Head of Global Endurance, Generalist
Health Care
Software, Media
Health Care
Director of Research, Generalist
Internet
Payments
Health Care
Internet
Generalist
Blockchain, Cryptocurrency, Gaming
Generalist

28
26
25
22
34
27
10
11
13
6
17
10
2
10
3
28
15
4

24
26
20
20
29
22
7
4
3
3
2
6
2
1
1
1
<1
<1

24
22
18
18
23
22
7
4
3
3
2
2
2
1
1
1
<1
<1

Head of Consilient Research
Consilient Research

35
17

2
2

2
2

Big Ideas, Emerging Themes
Big Ideas, Emerging Themes
Big Ideas, Emerging Themes
Big Ideas, Emerging Themes

21
5
2
8

21
5
2
1

18
5
2
1

Head of Sustainability Research, Internet
Sustainability Research

10
17

10
8

10
1

27
25
18
8
19
10
22
2
<1
12

17
5
15
8
19
10
22
2
<1
4

3
1
11
<1
19
<1
15
2
<1
1

INVESTORS

RESEARCH RESPONSIBILITIES

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• 11 Investors
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Team members may change without notice from time to time. Years of Experience listed above refers to Industry Experience.
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DEFINITIONS

Blockchain: Blockchain is a shared, immutable ledger that facilitates the
process of recording transactions and tracking assets in a business network.
Cryptocurrency: Cryptocurrency (notably, Bitcoin) operates as a
decentralized, peer-to-peer financial exchange and value storage that is
used like money. It is not backed by any government. Federal, state or
foreign governments may restrict the use and exchange of cryptocurrency.
Cryptocurrency may experience very high volatility.
Fungibal Assets: Fungible tokens or assets are divisible and non-unique.
For instance, fiat currencies like the U.S. dollar are fungible.
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Financial Conduct Authority. Registered in England. Registered No. 1981121.
Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA.
In Switzerland, MSIM materials are issued by Morgan Stanley & Co.
International plc, London (Zurich Branch) Authorised and regulated by
the Eidgenössische Finanzmarktaufsicht (“FINMA”). Registered Office:
Beethovenstrasse 33, 8002 Zurich, Switzerland.
Outside the US and EU, Eaton Vance materials are issued by Eaton Vance
Management (International) Limited (“EVMI”) 125 Old Broad Street,
London, EC2N 1AR, UK, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority.

10

MORGAN STANLEY INVESTMENT MANAGEMENT

|

CONVERGENCE

Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo
Serbelloni Corso Venezia, 16 20121 Milano, Italy. The Netherlands: MSIM
FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein
1 1096HA, Netherlands. France: MSIM FMIL (Paris Branch), 61 rue de
Monceau 75008 Paris, France. Spain: MSIM FMIL (Madrid Branch), Calle
Serrano 55, 28006, Madrid, Spain. Germany: MSIM Fund Management
(Ireland) Limited Frankfurt Branch, Grosse Gallusstrasse 18, 60312
Frankfurt am Main, Germany (Gattung: Zweigniederlassung (FDI) gem.
§ 53b KWG).
MIDDLE EAST
Dubai: MSIM Ltd (Representative Office, Unit Precinct 3-7th FloorUnit 701 and 702, Level 7, Gate Precinct Building 3, Dubai International
Financial Centre, Dubai, 506501, United Arab Emirates. Telephone: +97
(0)14 709 7158).
U.S.
NOT FDIC INSURED | OFFER NO BANK GUARANTEE | MAY LOSE
VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| NOT A DEPOSIT
Latin America (Brazil, Chile Colombia, Mexico, Peru, and Uruguay)
This material is for use with an institutional investor or a qualified investor
only. All information contained herein is confidential and is for the exclusive
use and review of the intended addressee, and may not be passed on to
any third party. This material is provided for informational purposes only
and does not constitute a public offering, solicitation or recommendation
to buy or sell for any product, service, security and/or strategy. A decision
to invest should only be made after reading the strategy documentation
and conducting in-depth and independent due diligence.
ASIA PACIFIC
Hong Kong: This material is disseminated by Morgan Stanley Asia Limited
for use in Hong Kong and shall only be made available to “professional
investors” as defined under the Securities and Futures Ordinance of Hong
Kong (Cap 571). The contents of this material have not been reviewed
nor approved by any regulatory authority including the Securities and
Futures Commission in Hong Kong. Accordingly, save where an exemption
is available under the relevant law, this material shall not be issued,
circulated, distributed, directed at, or made available to, the public in
Hong Kong. Singapore: This material is disseminated by Morgan Stanley
Investment Management Company and should not be considered to be

COUNTERPOINT GLOBAL INSIGHTS

the subject of an invitation for subscription or purchase, whether directly
or indirectly, to the public or any member of the public in Singapore other
than (i) to an institutional investor under section 304 of the Securities
and Futures Act, Chapter 289 of Singapore (“SFA”); (ii) to a “relevant
person” (which includes an accredited investor) pursuant to section 305
of the SFA, and such distribution is in accordance with the conditions
specified in section 305 of the SFA; or (iii) otherwise pursuant to, and in
accordance with the conditions of, any other applicable provision of the
SFA. This publication has not been reviewed by the Monetary Authority
of Singapore. Australia: This material is disseminated in Australia by
Morgan Stanley Investment Management (Australia) Pty Limited ACN:
122040037, AFSL No. 314182, which accept responsibility for its contents.
This publication, and any access to it, is intended only for “wholesale
clients” within the meaning of the Australian Corporations Act. Calvert
Research and Management, ARBN 635 157 434 is regulated by the U.S.
Securities and Exchange Commission under U.S. laws which differ from
Australian laws. Calvert Research and Management is exempt from the
requirement to hold an Australian financial services licence in accordance
with class order 03/1100 in respect of the provision of financial services
to wholesale clients in Australia.
Japan
For professional investors, this material is circulated or distributed
for informational purposes only. For those who are not professional
investors, this material is provided in relation to Morgan Stanley
Investment Management (Japan) Co., Ltd. (“MSIMJ”)’s business with
respect to discretionary investment management agreements (“IMA”) and

investment advisory agreements (“IAA”). This is not for the purpose of a
recommendation or solicitation of transactions or offers any particular
financial instruments. Under an IMA, with respect to management of assets
of a client, the client prescribes basic management policies in advance and
commissions MSIMJ to make all investment decisions based on an analysis
of the value, etc. of the securities, and MSIMJ accepts such commission.
The client shall delegate to MSIMJ the authorities necessary for making
investment. MSIMJ exercises the delegated authorities based on investment
decisions of MSIMJ, and the client shall not make individual instructions.
All investment profits and losses belong to the clients; principal is not
guaranteed. Please consider the investment objectives and nature of risks
before investing. As an investment advisory fee for an IAA or an IMA,
the amount of assets subject to the contract multiplied by a certain rate
(the upper limit is 2.20% per annum (including tax)) shall be incurred in
proportion to the contract period. For some strategies, a contingency fee
may be incurred in addition to the fee mentioned above. Indirect charges
also may be incurred, such as brokerage commissions for incorporated
securities. Since these charges and expenses are different depending on a
contract and other factors, MSIMJ cannot present the rates, upper limits,
etc. in advance. All clients should read the Documents Provided Prior to
the Conclusion of a Contract carefully before executing an agreement.
This material is disseminated in Japan by MSIMJ, Registered No. 410
(Director of Kanto Local Finance Bureau (Financial Instruments Firms)),
Membership: the Japan Securities Dealers Association, The Investment
Trusts Association, Japan, the Japan Investment Advisers Association and
the Type II Financial Instruments Firms Association.