Morgan Stanley has change into the primary main U.S. financial institution to decide to measuring and disclosing the local weather influence of its loans and investments, asserting final week that it has joined a multi-trillion greenback group of worldwide monetary establishments growing a standardized technique for carbon accounting.
The U.S. financial institution has change into the most recent monetary agency to hitch the International Carbon Accounting Partnership (PCAF), a rising coalition which first started within the Netherlands in 2015 and now boasts 66 formal members from world wide representing greater than $5.three trillion in property.
As well as, Morgan Stanley additionally has joined the PCAF’s steering committee alongside founding members Amalgamated Financial institution from the USA; Dutch banks Triodos, BN AMRO and ASN Financial institution; and the Alliance for Banking on Values (GABV).
As a steering committee member, Morgan Stanley will “lend insights and experience” to assist PCAF develop the worldwide accounting customary, in addition to committing to measure and disclose its personal monetary emissions, based on business coalition.
The announcement marks a significant coup for the PCAF and is a landmark inexperienced transfer for Morgan Stanley, one of many world’s largest and most recognizable personal banking teams, which from 2016 to 2019 invested greater than $91 billion n fossil fuels, based on the Rainforest Motion Community.
Wall Avenue is driving the local weather disaster, and if banks wish to be a part of the answer, they’ve to start out by being clear concerning the extent to which they’re at present a part of the issue.
“We’re excited to hitch PCAF and to help the vital work they’re resulting in construct a strategy for international banks’ efforts to trace and measure local weather change dangers,” stated Audrey Choi, Morgan Stanley’s chief sustainability officer and CEO of the Morgan Stanley Institute for Sustainable Investing.
Launched globally solely final 12 months, PCAF describes itself as as a collaborative effort from monetary establishments to develop “a harmonized strategy to the evaluation and disclosure of greenhouse fuel emissions financed by loans and investments” to be used by asset homeowners, asset managers and banks.
It’s a separate initiative from the Taskforce on Local weather-related Monetary Disclosures (TCFDs), though the 2 can complement one another, based on the PCAF.
Whereas the TCFDs provide a voluntary framework for assessing and disclosing bodily and transitional local weather dangers, the PCAF goals to develop a proper carbon accounting customary for the monetary sector, doubtlessly enabling for extra element and consistency in reporting.
PCAF stated the measurement of the emissions related to loans and investments — the monetary sector’s Scope three emissions — would supply essential information to assist banks and monetary companies to evaluate local weather danger, handle influence, meet the disclosure calls for of stakeholders and clients, and assess progress in direction of local weather objectives.
The business coalition’s carbon accounting methodology “will quickly be printed as a worldwide methodology” and “has been the work of a core group of monetary establishments, together with Morgan Stanley,” it defined.
“We’re very enthusiastic about Morgan Stanley’s management in sustainability and imagine they are going to deliver an vital voice to our administration group,” stated Giel Linthorst, government director of the PCAF secretariat. “As we work in direction of COP26, and a crucial 12 months forward in aligning the finance sector with the objectives of the Paris Local weather Settlement, we imagine that PCAF and member monetary establishments will play an vital management position in that work.”
It comes as banks and monetary establishments face rising strain from campaigners, policymakers, rules and traders to account for and take motion towards the sizeable local weather danger of their funding portfolios.
Ben Cushing, senior marketing campaign consultant at U.S. environmental NGO Sierra Membership, hailed the transfer as “a significant step in the appropriate course” for Morgan Stanley, and stated all banks claiming to help the objectives of the Paris Settlement additionally ought to observe go well with.
“Wall Avenue is driving the local weather disaster, and if banks wish to be a part of the answer, they’ve to start out by being clear concerning the extent to which they’re at present a part of the issue,” he stated. “Measuring and disclosing their influence is vital, and now the crucial subsequent step will probably be to mitigate this influence by committing to an aggressive timeline to section out their funding for climate-polluting fossil fuels altogether.”