Ahead of the UN 2015 Paris Climate Conference (COP21), Morgan Stanley and Wells Fargo became the latest major banks to pledge to eliminate their support for the coal industry in favor of reducing carbon pollution associated with the industry.
Morgan Stanley said that it “recognizes that climate change poses significant risks to the global economy and that reducing carbon emissions is critical to our success in addressing the challenges presented by a changing climate.”
The bank has promised to continue to reduce its exposure to coal mining globally, and will not provide financing where the specified use of proceeds would be directed toward mountaintop removal mining. Morgan Stanley will not provide financing for companies that rely on mountaintop removal for anything more than a limited portion of their annual coal production, and it won’t provide financing for any company that does not have a plan to eliminate existing mountaintop removal operations in the foreseeable future.
In the U.S. and other developed economies, Morgan Stanley will decline financing transactions that directly support the development of new or physical expansions of coal-fired power generation, unless there is sufficient carbon capture and storage or equivalent emissions and pollutant reduction technology in place.
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In developing regions, Morgan Stanley will require escalation and senior approval for financing transactions that directly support the development of new coal-fired power. Considerations include assessment of low-carbon alternatives feasibility and cost; technology and emissions controls used; the energy needs and affordability in the region; regulatory compliance; and the company’s efforts to report and reduce greenhouse gas emissions.
Wells Fargo, the fourth-biggest U.S. bank by assets, said it would reduce lending to coal-mining companies. The bank said it has been and will continue to limit and reduce its credit exposure to the coal mining industry.
The two companies join a growing list of banks, including Citigroup, Bank of America and Goldman Sachs, that have pledged to stop or scale back support for coal projects in recent months.
Diverting these fossil fuel funds toward sustainable investments can have a major payback. Investing in sustainability has usually met and often exceeded the performance of comparable traditional investments, both on an absolute and risk-adjusted basis, across asset classes and over time, according to a report from the Morgan Stanley Institute for Sustainable Investing.
In June, Morgan Stanley closed on the issuance of a $500 million green bond, its first green bond, as part of the company’s strategy to advance market-based solutions to social and environmental challenges. Funds equal to the net proceeds of Morgan Stanley’s green bond will be allocated to various renewable energy and energy efficiency projects.