But investment bank highlights lack of consistent CO2 methodologies for finance as 'critical challenge' for establishing near-term emissions reduction targets for its portfolio
Morgan Stanley has become the first major US bank to target 'net zero financed emissions' by 2050, with the bank yesterday announcing plans to drastically reduce its lending and underwriting of debt and equity to carbon intensive industries.
The announcement has been hailed by green groups for firing the starting gun for more ambitious climate action across Wall Street, which has long provided the financial lifeline to fossil fuel exploration and extraction industries.
However, question marks have also been raised about how the banking giant intends to deliver on the target, with the announcement containing few details or a strategy for achieving net zero financed emissions over the next three decades.
The investment bank, which invested $91bn in fossil fuels between 2016 and 2019 according to the Rainforest Action Network, said it would seek to set near-term emissions reduction goals for its portfolio "once consistent, robust, and comparable metrics and methods are available".
It cited a lack of standardised methodologies around measuring and disclosing financed emissions as a "critical challenge", and that that it would work to develop these tools alongside other members of the growing Partnership for Carbon Accounting Financials coalition which it joined in July.
"Climate change is one of the most complex and interconnected issues of our time," said Morgan Stanley chief sustainability officer Audrey Choi. "Morgan Stanley believes we have an important role to play in facilitating the transition to a low carbon future, and we are proud to embark on this journey."
But although scarce on details, the announcement has been broadly commended by green groups for setting a new bar for climate action on Wall Street that could help precipitate a broader shift of capital away from fossil fuel industries.
Danielle Fuguere, president of shareholder advocacy group As You Sow said Morgan Stanley showcased the "importance feasibility of following disclosure commitments with concrete action".
"Morgan Stanley's announcement sends a signal across the economy that access to capital will increasingly be tied to a company's ability to reduce its emissions at the rate and scope necessary to align with the Paris goal of limiting warming to 1.5C," she said.
Meanwhile Ben Ratner, senior director at the US green NGO Environment Defense Fund, said the bank would not be the last to target net zero financed emissions in the coming decades. "Morgan Stanley's commitment is a clear sign to shareholders that it sees the commercial opportunity to shift capital to companies with net zero commitments, strategies, and actions," he said. "The real leaders will emerge based on their ability to set near-term milestones, engage key sectors and ensure climate-friendly asset allocation".
But Tamara Toles O'Laughlin, North American director of green action group 350.org, countered that the announcement was "late and little" and would need to be followed up by concrete and concerted action.
"Morgan Stanley's announcement is a step in the right direction - for a decade ago," she said. "As a major in finance and securities and a driver of funds toward environmental devastation, we expected action beyond rhetoric. This is not it."
Morgan Stanley's announcement comes less than a week after a report prepared for Commodity Futures Trading Commission, the US regulator for derivatives, issued a stark warning of the threat posed by climate change to the financial sector.
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