Morgan Stanley announces 2030 targets towards net-zero financed emissions commitment

US bank to initially focus on auto manufacturing, energy and power sectors to help achieve 2050 target

The Morgan Stanley building in New York. It was first major US-headquartered bank to commit to net-zero financed emissions by 2050. Reuters

Morgan Stanley, one of the biggest banks in the US, has announced steps towards its commitment to reaching net-zero financed emissions by 2050, setting sector-specific interim targets for reductions.

The New York-based lender said it will focus on reduction targets related to its business activities starting with the most emissions-intensive sectors in its corporate lending portfolio – car manufacturing, energy and power – and will gradually add more over time.

This will drive the consideration of climate impact in its financing decisions and guide its engagement with clients in these industries. The bank has committed to reducing emissions in these sectors by 35 per cent, 29 per cent and 58 per cent, respectively, it said in a detailed methodology.

“The recent report from the Intergovernmental Panel on Climate Change makes clear the urgency of addressing greenhouse gas emissions, and that near-term reductions are necessary if the world is to limit global temperature rise to 1.5°C. Morgan Stanley’s interim net-zero targets set us on that path towards a more sustainable and prosperous future,” Audrey Choi, chief sustainability officer of Morgan Stanley, said in a statement.

“Morgan Stanley is committed to working with our clients to accelerate sustainable efforts by offering leading products, solutions and insights to facilitate their low carbon transition plans.”

The establishment of the Paris Agreement on climate change in 2015 made banks realise the importance of building on their commitments to more sustainable operations. Morgan Stanley became the first major US-headquartered financial services firm to commit to net-zero financed emissions by 2050.

Since then, all of America's six biggest banks – JPMorgan Chase, Bank of America, Morgan Stanley, Citigroup, Goldman Sachs and Wells Fargo – have made commitments towards this goal.

The UN Conference on Trade and Development estimated that the value of sustainability-themed investment products hit $3.2 trillion in 2020 – up over 80 per cent from the previous year. This indicates that the capital market is increasingly aligning itself with sustainable development outcomes, including the UN's sustainable development goals.

These products include sustainable funds ($1.7tn), green bonds ($1tn), social bonds ($212 billion), and mixed-sustainability bonds ($218bn).

Morgan Stanley's announcement is part of its commitment to finance $1tn towards the SDGs, including $750bn of financing to drive the climate transition.

“With our net-zero commitment as our 'north star', we are in the process of embedding climate considerations across our risk management and business activities. This approach supports our objective to manage our business for the long term while mitigating risk, focusing on innovation and enhancing shareholder value,” the bank said in its methodology.

Morgan Stanley surpassed expectations in the third quarter, reporting net revenues of $14.8bn and net income of $3.7bn, both up more than 25 per cent year-over-year. Its investment banking unit flourished, boosted by mergers and initial public offering activity.