Climate: Morgan Stanley, Climate engagement from RBC Asset Management

Banks play a pivotal role in allocating capital towards green projects and companies. As such sustainability, particularly best in class environmental strategies, form an important part of the investment thesis within the sector.

RBC Asset Management, one of our asset managers has engaged with Morgan Stanley several times over the course of the year, to better understand whether the company remains a leader within the climate space. Morgan Stanley was one of the first movers, amongst global financial service firms, to commit to achieving Net-Zero in financed emissions by 2050. Whilst culturally at the top they seem to have retained that focus, scores such as TPI (Transition Pathway Initiative, independent non-profit) paint the company’s strategy in more of a negative light. Nevertheless, the company highlights that there is continued commitment to increased sustainability.

Management have indicated that they have now rolled out their climate strategy assessment framework, which allows for transition preparedness and target assessment. Whilst this does not mean a reduction in high carbon investments, it does equate to increased green and transition financing.

From a company (Scope 1 & 2) level climate strategy perspective, the company continues to rely on RECs (renewable energy certificates) and offsets to realise operational carbon neutrality. There are no plans to shift away from this in the near term.

Given the position Banks hold in bringing about the transition, and the complexity of achieving global Net-Zero, RBC Asset Management will continue to monitor and engage with the company on these issues.

At the time of publication (May 2024) Morgan Stanley were held in our Sterling Corporate Bonds, Global Sustainable Equity, Passive Developed Equities, Carbon Transition Benchmark (CTB) Passive Global Equities, Paris Aligned Benchmark (PAB) Passive Global Equities and Passive Smart Beta Equities portfolios.