Morgan Stanley

Reaching Net-Zero Financed Emissions

Climate change is one of the most complex issues of our time, presenting both risks and opportunities for commerce, government and civil society. As a global financial services firm, Morgan Stanley has an important role to play in helping to direct capital toward low-carbon solutions and achieve real-economy decarbonization.

In September 2020, Morgan Stanley announced our ambition to achieve net-zero financed emissions by 2050, followed by sector-specific interim 2030 targets in November 2021.

We updated our 2030 Interim Financed Emissions Targets in October 2024 to refresh the existing sector-specific targets for Power, Energy and Auto Manufacturing and set new targets for the Aviation, Chemicals and Mining sectors. These targets cover our corporate relationship lending exposure. The update also included a change in the target metric from financed emissions lending intensity (FELI) to physical intensity, and a shift in the baseline year from 2019 to 2022 to use the most recent and highest quality emissions data available.

Morgan Stanley has set targets that are designed to strike an appropriate balance between being ambitious and credible while also being realistic about present near-term global challenges. For all sectors, we have established a target range, with the upper bound target referencing science-based climate scenarios that are in line with a 1.5°C outcome, and the lower bound referencing a 1.7°C scenario outcome.

We remain steadfast in our commitment to net-zero and will continue to engage with clients on climate transition strategies to help move the world to net-zero emissions by 2050.

Our 2030 Targets

Sector In-Scope Emissions Metric 2022 Baseline Intensity 2030 Target 2030 Target Value

Auto Manufacturing		 Scope 1 + 2 and Scope 3 (Category 11) gCO2e/vehicle km 153 29% to 45% 84 to 109

Aviation		 Scope 1 gCO2e/revenue tonne km(RTK) 872 13% to 24% 663 to 759

Chemicals		 Scope 1 + 2 kgCO2e/tonne produced 758 18% to 28% 546 to 622

Energy - End Use		 Scope 3 (Category 11) gCo2e/MJ 60.4 10% to 19% 48.9 to 54.4

Energy - Operational		 Scope 1 + 2 gCo2e/MJ 6.7 12% to 20% 5.4 to 5.9

Mining		 Scope 1 + 2 tCo2e/tonne CuEq 7.1 23% to 31% 4.9 to 5.5

Power		 Scope 1 kgCo2e/MWh 355 45% to 60% 142 to 195

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Disclosures

Certain portfolios may include investment holdings that consider one or more Environmental, Social and Governance (“ESG”) factors (referred to as “ESG investments”). For reference, environmental ("E") factors can include, but are not limited to, climate change, water, waste, and biodiversity. Social ("S") factors can include, but not are not limited to, employees, diversity & inclusion, cyber security, data privacy, health & wellness, supply chains, product safety & security, community engagement, and human rights. Governance ("G") factors can include, but are not limited to, board structure & oversight, leadership composition, pay and incentive structures, corruption & bribery, ethics & business conduct, shareholder rights, accounting & audit practices, tax evasion, and risk management. You should carefully review an investment product's prospectus or other offering documents, disclosures and/or marketing material to learn more about how it incorporates ESG factors into its investment strategy. 

ESG investments may also be referred to as sustainable investments, impact aware investments, socially responsible investments or diversity, equity, and inclusion (“DEI”) investments. It is important to understand that ESG definitions and criteria used within the industry can vary, and ESG ratings of the same subject companies and/or securities can vary among different ESG ratings providers for several reasons including, differences in definitions, methodologies, processes, data sources and subjectivity among ESG rating providers when determining a rating. Certain issuers of investments including, but not limited to, separately managed accounts (“SMAs”), mutual funds and exchange traded funds (“ETFs”) may have differing and inconsistent views concerning ESG criteria where the ESG claims made in offering documents or other literature may overstate ESG impact. Further, socially responsible norms vary by region, and an issuer’s ESG practices or Morgan Stanley’s assessment of an issuer’s ESG practices can change over time. 

Portfolios that include investment holdings deemed ESG investments or that employ ESG screening criteria as part of an overall strategy may experience performance that is lower or higher than a portfolio not employing such practices. Portfolios with ESG restrictions and strategies as well as ESG investments may not be able to take advantage of the same opportunities or market trends as portfolios where ESG criteria is not applied. There is no assurance that an ESG investing strategy or techniques employed will be successful. Past performance is not a guarantee or a dependable measure of future results. For risks related to a specific fund, please refer to the fund's prospectus or summary prospectus.

Investment managers can have different approaches to ESG and can offer strategies that differ from the strategies offered by other investment managers with respect to the same theme or topic. Additionally, when evaluating investments, an investment manager is dependent upon information and data that may be incomplete, inaccurate, or unavailable, which could cause the manager to incorrectly assess an investment’s ESG characteristics or performance. Such data or information may be obtained through voluntary or third-party reporting. Morgan Stanley does not verify that such information and data is accurate and makes no representation or warranty as to its accuracy, timeliness, or completeness when evaluating an issuer. 

Morgan Stanley’s assessment of an issuer’s ESG practices or an ESG portfolio is as of the date of this material. No assurance is provided that the underlying assets have maintained or will maintain any applicable ESG designations or any stated ESG compliance, or that the underlying assets have been operated or will be operated in an ESG-compliant manner. The ESG impacts of the securities and any underlying assets may vary over time.

This can cause Morgan Stanley to incorrectly assess an issuer’s business practices with respect to its ESG practices. As a result, it is difficult to compare ESG investment products.

Morgan Stanley makes no representation as to the compliance or otherwise of any fund or portfolio with any laws or regulatory guidelines, recommendations, requirements or similar relating to the ESG characterization of any fund or portfolio, or in connection with or to meet any of your investing ESG objectives, metrics, or criteria. 

The appropriateness of a particular ESG investment or strategy will depend on an investor’s individual circumstances and objectives. Principal value and return of an investment will fluctuate with changes in market conditions.

There is no assurance that an ESG investing strategy or techniques employed will be successful. Past performance is not a guarantee or a dependable measure of future results.

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