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July 20, 2020, 7:55 p.m. EDT

Morgan Stanley will be first U.S. bank to disclose how much its loans and investments contribute to greenhouse-gas emissions

The investment bank will advise the Partnership for Carbon Accounting Financials on standardization

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By Rachel Koning Beals


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Audrey Choi, Morgan Stanley’s chief sustainability officer, said building a methodology for global banks’ efforts to track and measure climate change risks is important.

Morgan Stanley will start measuring and disclosing lending portfolio greenhouse gas emissions and back the push toward universal climate-risk accounting — the first U.S. bank to take such actions.

The Partnership for Carbon Accounting Financials (PCAF) confirmed on Monday that Morgan Stanley /zigman2/quotes/209104354/composite MS +0.92%  has joined in its efforts toward a unified measuring financed emissions. In addition, Morgan Stanley will help PCAF develop the global accounting standard that can be used by all financial institutions to measure and reduce their climate impact.

Launched globally last year, PCAF is a collaboration to standardize carbon accounting for the financial sector, enabling a harmonized approach to the assessment and disclosure of greenhouse gas emissions financed by loans and investments.

It has had mostly European members, drawing the criticism from some climate groups that the U.S. lags in these efforts.

“We are pleased that U.S. banks are finally stepping up to the challenge of measuring and reducing climate impacts as European peers already have. Morgan Stanley’s commitment shows that digging in and taking responsibility for its climate contribution is good business. We expect other U.S. banks to take note,” said Lila Holzman, energy program manager at As You Sow, a sustainable-investing advocate.

Morgan Stanley joins PCAF’s 66 formal members, which include financial institutions from around the world and represent more than $5.3 trillion in assets.

Read: For first time ever, majority of shareholders push oil giant Chevron to align with Paris climate pact

The measurement of financed emissions, defined by the Greenhouse Gas Protocol as Scope 3 - category 15 emissions, provides important data that financial institutions can use to assess risk, manage impact, meet the disclosure expectations of important stakeholders, and assess progress and pathways to global climate goals. Morgan Stanley also commits to start measuring and disclosing lending portfolio greenhouse gas emissions.

Climate groups have been welcoming bank policy changes but warn that the goals from the finance sector aren’t enough to limit climate change to 1.5 degrees Celsius, the target laid out in the voluntary Paris pact. The oil industry and its financial and political backers are pushing for a mix of energy sources as the U.S. embraces energy independence, including relatively low-cost natural gas, along with renewable options.

“As we work towards COP26, and a critical year ahead in aligning the finance sector with the goals of the Paris Climate Agreement, we believe that PCAF and member financial institutions will play an important leadership role in that work,” said Giel Linthorst, executive director of the PCAF secretariat.

Read: Here’s why carbon emissions at utilities can fall even during a powerful economy

JPMorgan Chase & Co. /zigman2/quotes/205971034/composite JPM +0.87%  , which is considered to be the largest lender to the oil patch, earlier this year said it will end or phase out loans to some fossil-fuel interests, namely Arctic drilling and coal mining.

Morgan Stanley shares are up roughly 1.5% in the year to date, while JPM shares are down 30% in the year to date. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.34%  is down 6.5% over the same span.

/zigman2/quotes/209104354/composite
US : U.S.: NYSE
$ 47.04
+0.43 +0.92%
Volume: 9.82M
Sept. 25, 2020 4:03p
P/E Ratio
8.50
Dividend Yield
2.98%
Market Cap
$73.49 billion
Rev. per Employee
$831,709
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/zigman2/quotes/205971034/composite
US : U.S.: NYSE
$ 93.47
+0.81 +0.87%
Volume: 13.29M
Sept. 25, 2020 4:00p
P/E Ratio
12.59
Dividend Yield
3.85%
Market Cap
$282.39 billion
Rev. per Employee
$497,647
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,173.96
+358.52 +1.34%
Volume: 391.73M
Sept. 25, 2020 5:06p
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Rachel Koning Beals is a MarketWatch news editor in Chicago.

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