Morgan Stanley Is First U.S. Bank to Measure How Dirty Its Investments Are

A sign hangs from Morgan Stanley's New York City headquarters on June 21, 2006. (Photo: Mario Tama, Getty Images)
A sign hangs from Morgan Stanley's New York City headquarters on June 21, 2006. (Photo: Mario Tama, Getty Images)

Fossil fuels are increasingly an unattractive investment. On Monday, Politico reported that Morgan Stanley will be the first U.S. bank to begin disclosing how much its fossil fuel loans investments contribute to climate change. This is only the latest in a string of decisions banks have made around the oil and gas industry.

After pressure from members of the Gwich’in Nation in Alaska, several banks had begun to pull their funding of various fossil fuel projects. That’s only the beginning, though. Since late last year, the oil and gas industry has put banks in financial trouble, as companies fall behind on their loans. And remember when their value went negative for a brief moment this year? The coronavirus pandemic has finally forced banks to recognise the poor investment they’ve made.

Now, Morgan Stanley is going a step further by analysing how bad these investments may actually be for the planet. For instance, if the bank is funding a major pipeline project, it would now have to quantify how the project’s greenhouse gas emissions factor into the bank’s own climate impact. Morgan Stanley will be joining the Partnership for Carbon Accounting Financials, which looks at the financial sector’s contribution to the goals set forth in the Paris Agreement. The partnership is made up of 67 institutions (including Morgan Stanley) that hold $US5.3 ($8) trillion in assets. Measuring the greenhouse gas emissions Morgan Stanley creates through its investments will help it “to develop new sustainable investing products for investors,” Politico reports.

“This is a journey, and I think that this is an incredibly important piece of it because as we all know it’s harder to make people respond to something when there’s no data, it’s hard to have data when you don’t have measurement,” Audrey Choi, chief sustainability officer for Morgan Stanley and CEO of its Institute for Sustainable Investing, told Politico. “This is an important step toward getting more clarity.”

Many activists have been focusing their pressure on the players that fund fossil fuel projects. After all, projects for oil pipelines, gas terminals, and petrochemical plants can’t get very far without money. Even these giant, multibillion-dollar energy companies rely on loans and bank investments to make their plans reality. If enough banks recognise that these projects aren’t worth investing in, the hope is that they’ll finally end.

“This move is a major step in the right direction for Morgan Stanley, and any bank that claims to support climate action or the goals of the Paris Agreement should follow suit,” Sierra Club Senior Campaign Representative Ben Cushing said in an online statement. “Wall Street is driving the climate crisis, and if banks want to be part of the solution, they have to start by being transparent about the extent to which they’re currently part of the problem. Measuring and disclosing their impact is important, and now the critical next step will be to mitigate this impact by committing to an aggressive timeline to phase out their funding for climate-polluting fossil fuels altogether.”

Joe Biden Still Doesn’t Have a Plan to Stop Oil and Gas Production

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The banking sector has been mixed in its climate change agenda, though. In April, major U.S. banks were looking into securing fossil fuel companies that were going bankrupt amid the coronavirus-fuelled economic crisis. I don’t understand why the same banks looking to limit their funding of these projects would instead want to own them, yet here we are. JPMorgan Chase remains the top fossil fuel financier, according to data from the Rainforest Action Network. Wells Fargo, Citi, and Bank of America aren’t far behind, either. Since 2016, 35 banks are responsible for $US2.7 ($4) trillion funneled into the climate crisis.

That might soon change under this new direction the sector is taking. The power of that new direction, however, remains unclear. If legislators couple this wave from the private sector with formal regulation to slowly phase out the fossil fuel industry, perhaps there’s hope after all. Presidential hopeful Joe Biden needs to get that plan together ASAP.