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· Posted on
February 21, 2024

Morgan Stanley's getting its hands dirty by removing 1 gigaton of emissions (or 10,000 aeroplanes worth of gunk)

Morgan Stanley aims to invest in companies that will collectively remove 1 gigaton of carbon dioxide emissions by 2050.

What's the key learning?

  • Morgan Stanley has announced a $1 billion private equity strategy called 1GT with an aim to invest in companies that will collectively remove 1 gigaton of carbon dioxide emissions by 2050.
  • The investment team’s compensation will not be tied directly to financial returns, but also climate goals.
  • There are many ways to incentivise employees to achieve certain goals and aligning employee incentives with financial results is obviously one of the most common.

👉 Background: Morgan Stanley is an investment management and financial services company based in New York. It's the 39th biggest bank in the world based on total assets held.

👉 What happened: Now, Morgan Stanley has announced a $1 billion private equity strategy called 1GT. The aim is to invest in companies that will collectively remove 1 gigaton of carbon dioxide emissions by 2050.

👉 What else: This is the equivalent weight of 10,000 fully-loaded aeroplanes in carbon emissions. And interestingly, the investment team’s compensation will not be tied directly to financial returns, but also climate goals.

What's the key learning?

💡There are many ways to incentivise employees to achieve certain goals. Aligning employee incentives with financial results is obviously one of the most common.

💡But it is also one of the most controversial ways to drive behaviour within an organisation. In fact, a study by AMP Capital showed that “incentives linked solely to financial metrics can often fuel negative culture and conduct". Think: the findings from the Royal Commission into banking.

💡So Morgan Stanley is flipping the incentives for its climate investing team so that staff are rewarded for doing good for the planet, rather than just doing good financially.

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