Morgan Stanley Adjusts Climate Targets Amid Global Challenges

Morgan Stanley changes its climate targets to embrace a new range-based approach for the reduction of financed emissions. This move reflects global challenges toward achieving the 1.5°C temperature limit stipulated by the Paris Agreement. The change comes because the bank now realizes that the present global economic and policy pathways are not aligned to hit this more stringent limit-the basis of its previous targets. It reminds one of its goal of going net-zero by 2050, in line with the Paris Agreement’s ambition of keeping temperature increases as low as possible well below 2°C.

According to Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer, “We re-affirmed our commitment to support efforts to accelerate climate transition strategies that align with a net-zero emissions by or around the middle of this century. We remain comfortable with our softened position on the 1.5°C target, which reflects a balance between ambition and realism-taking into account near-term headwinds from current government policies, technology deployment, and consumption patterns that are insufficient to support the Paris Agreement goals at this time”.

Morgan Stanley’s climate targets have been established since 2020 and track a pathway to net zero financed emissions by 2050, with interim targets for several high-emission sectors. The firm is being realistic about the possibility that it won’t meet these goals because it acknowledges some client progress will be impeded by factors such as the adoption of electric vehicles coming in slower than needed and increased geopolitical tensions affecting energy security. Specifically, the report highlights challenges in key sectors such as automotive and energy. In these sectors, it is imperative to speed up decarbonization, which has become more difficult than ever due to current economic and technological constraints. For instance, in the energy sector, Morgan Stanley points out the challenge that needs to be balanced to ensure regional energy security in developing economies and growing demand for energy that supports further global economic growth.

The report also includes new emissions reduction targets for the Power, Energy, and Auto Manufacturing sectors, in addition to new targets for Aviation, Chemicals, and Mining. These sectors combined account for around 65% of the corporate lending portfolio financed by total emissions. As Morgan Stanley’s targets are currently centered on the corporate relationship lending segment, the firm plans, over time, to further broaden this scope by including capital markets and event lending in its strategy for reducing emissions.

Alsford said Morgan Stanley is well positioned as a global financial leader to guide capital to sustainable, low-carbon solutions and therefore to support real-economy decarbonization. In setting achievable targets within a realistic range, Morgan Stanley will have credibility and transparency in pursuit of net zero while factoring in the practical obstacles that the firm and clients face on the way toward sustainable transformation.

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