Inaugural $500m green bond highlights Morgan Stanley sustainability push

Investment banking titan ramping up ESG progress

US investment banking giant Morgan Stanley has issued its first green bond, a $500m issue to help fund existing and future renewable energy and energy efficiency projects, as it ramps up the sustainable investment push heralded by the launch of its Institute for Sustainable Investing in 2013.

Funds equal to the net proceeds of Morgan Stanley’s green bond will be allocated to various renewable energy and energy efficiency projects. A “substantial amount” of these funds will correspond with investments in existing and future third-party renewable energy projects, primarily wind farms, including Route 66 Wind, a 150 MW wind farm under construction in Texas, and Rattlesnake Wind Energy Center, a 207 MW wind project also under construction in Texas.

Proceeds will be deposited into a segregated Morgan Stanley account for tracking disbursements. An independent accountant will report with respect to stated disbursements. There will be project updates and impact-focused reporting made available on a dedicated website.

With ‘Energizing the Green Bond Market’ the lead item on the bank’s homepage
today it demonstrates the commitment it is putting behind a sector it sees as a “virtuous cycle with plenty of room to grow”.

Vice Chairman Tom Nides said: “In the green bonds market, our firm is activating a wide range of capital markets expertise and capabilities to break new ground and mobilize capital towards realizing significant environmental impact.” The bank says it has led 27 green bond transactions representing over $15bn in total since 2013.Ahead of this offering, it created its own green bond framework that describes the process through which projects are selected to receive funding, so that the bond “operates at high levels of transparency, disclosure and verification.” Verification is by third-party firm DNV GL.

It comes as the bank has upped its sustainability research of late. In January, RI reported that the bank had released a comprehensive global framework for analyzing environmental, social and governance (ESG) risks and opportunities and embedding sustainability factors into valuing companies. The 116-page report, ‘Embedding Sustainability into Valuation’, was put together by the bank’s Sustainable + Responsible investment research team headed by Jessica Alsford.

And just this month the team released an ‘Investor Roadmap on Corruption’, highlighting some of the measures investors can use to identify the risk of corruption, the valuation impact and what companies can do to tackle this risk. In May the team looked at carbon capture and storage, concluding there is evidence it may be able to help limit global warming to a two degree scenario.

Elsewhere, Laura Tyson, the Morgan Stanley board director who is a former chair of the US President’s Council of Economic Advisers, penned an opinion piece recently where she forcefully put the business case for sustainability. “In fact, if a company is to fulfill its fiduciary responsibility to its investors, it has little choice but to go beyond financial returns to incorporate ESG factors that are likely to have a material impact on its performance over time,” she wrote.