Reaching Net-Zero Financed Emissions

Morgan Stanley’s Net-Zero Emissions Targets

To reach our goal and demonstrate progress toward net-zero emissions by 2050, we set 2030 interim targets for three sectors within our lending portfolio — Auto, Manufacturing, Energy and Power. Our key objective is to provide financing expertise to clients to support their low-carbon transition plans.

“Morgan Stanley’s 2030 interim targets represent an important step in our continued journey toward net-zero by 2050,” says Morgan Stanley Chairman and CEO James Gorman.

Read about the complete methodology for our 2030 interim emissions-reduction targets.

Our Approach to Net-Zero: Measure, Manage and Report

Morgan Stanley is taking a three-part approach to our net-zero commitments to develop methodologies that help achieve our goals. We call this our Measure-Manage-Report framework. 

Summary of Our Methodology

Our methodology details how Morgan Stanley will measure our portfolio's financed emissions and demonstrate measurable, transparent progress on our 2050 goal, with interim targets around our financing activities. The financed emissions targets are aligned with the science-based International Energy Agency’s (IEA) Net-Zero by 2050 emissions pathways. They will also be normalized to allow comparability. These targets and metrics will help embed climate considerations into our risk management and business activities. 

For a deeper dive into our target methodology, see our white paper.

We chose an approach that measures our financed emissions relative to total lending, as opposed to an absolute emissions approach, allowing the size of our lending capabilities to remain unconstrained. As companies transition to more sustainable business operations, significant amounts of capital will be required. An absolute emissions approach would limit our ability to help finance the transition because any additional lending to a company with emissions larger than zero, regardless of their transition plan, would increase our total financed emissions.

2030 Interim Sector Targets

The three sectors below – Auto Manufacturing, Energy and Power – reflect our lending portfolio’s most carbon-intensive sectors and the percentage reductions required between now and 2030 to align with the IEA net-zero pathways.

Auto Manufacturing: Our target includes the financed emissions of newly-sold passenger cars and trucks produced by auto manufacturers, relative to our firm’s lending commitment. We focus on all GHG emission scopes, including Scope 3 emissions of auto manufacturers, which are direct emissions from the vehicles. The metric will evaluate the greenhouse gas footprint of the sector and the industry’s transition to low-carbon vehicles (such as electric, fuel cell and hybrid-electric vehicles).
-35%
Emissions Reduction Target

Energy: We set a financed emissions lending intensity target that incorporates all three GHG scope emissions. Scopes 1 and 2 emissions will capture the carbon and methane emissions generated primarily from upstream exploration and extraction activities, along with associated purchased power. Scope 3 emissions will reflect indirect emissions generated from downstream activities (i.e. gasoline combustion or petrochemical development).

-29%
Emissions Reduction Target 

Power: Our financed emissions lending intensity target, covering all three GHG scope emissions, tracks greenhouse gas emissions associated with electricity producers. The Power sector metric captures fossil fuel power generation (i.e. coal and natural gas), as well as the sector’s transition to low-carbon sources such as solar, wind (onshore and offshore) and nuclear.

-58%
Emissions Reduction Target

Areas for Future Work

Designing Methodologies:
Our 2030 interim target methodology will remain iterative as we move forward in our net-zero journey. We will continue to develop additional accounting methodologies for financed emissions through PCAF, with a focus on a facilitated emissions methodology in the near future.

Expanding Target Sector Coverage:
We aim to set targets for additional sectors that align with the Net-Zero Banking Alliance objectives to cover a significant majority of our financed emissions. We will continue to engage with industries, clients and civil society to address some of the challenges related to setting and managing targets for other industries.

We will also explore additional pathways as they become available that may expand target coverage within our existing sectors.

Addressing Hard-to-Abate Sectors:
We consider our Energy target ambitious and achievable.  However, new technologies to capture carbon will require additional maturity and significant investment for widespread adoption as we approach 2050. Our firm will explore what further role we can play in developing additional technology solutions, building on our low-carbon financing commitment.

Addressing Data Challenges:
Data used for emissions reduction targets are constantly evolving. Morgan Stanley will continue to use best available data and search for additional inputs as the quality of information improves. This requires continued work with stakeholders and data providers to explore solutions that better assist in setting sector targets for emissions reductions.