Morgan Stanley to buy 40,000 tonnes of direct air capture removals

US bank Morgan Stanley has signed an agreement with Climeworks to purchase 40,000 tonnes of direct air capture carbon removals between now and 2037.

This is the bank’s first direct air capture (DAC) investment, and Climeworks’ second-largest deal to date. (BCG is the technology firm’s biggest client so far, with 80,000 tonnes purchased in several contracts.)

Climeworks already operates two DAC plants in Iceland, but Morgan Stanley’s purchase will support the scale-up of the technology in the US, where the company is the technology provider for the government-backed Direct Air Capture Hub Project Cypress in Louisiana – meant to be one of the nation’s first ‘megatonne hubs’.

“As a financial institution, Morgan Stanley plays an important role in helping to direct capital toward low-carbon solutions,” said Jessica Alsford, the bank’s Chief Sustainability Officer. “Through our partnership with Climeworks, we are supporting the development of technology that can help drive the global economy’s transition to a more sustainable future.”

Morgan Stanley’s climate strategy

The bank has a target of mobilising US$1 trillion for sustainable solutions by 2030, as well as achieving net zero financed emissions (on an intensity basis) by 2050.

Last month, Morgan Stanley announced that it set up a US$750 million private equity fund to invest in North American and European companies aiming to collectively avoid or remove one gigatonne of carbon dioxide-equivalent (CO2e) emissions from the atmosphere by 2050. 

The fund has an innovative executive remuneration programme through which half of the team’s financial incentives are tied to achieving its stated one gigatonne avoidance or removal goal by 2050.

At the time, Vikram Raju, Morgan Stanley Investment Management’s Head of Climate Private Equity Investing and 1GT – the name of the new fund – said: “We are pleased to have arrived at the final close of 1GT, a highly focused fund that is providing capital at the critical growth stage to companies whose products and services enable meaningful reduction in the global carbon footprint. 1GT’s investors saw the unique opportunity to invest in a fund with a tangible, transparent, and independently measured climate goal, which directly ties to the team’s incentive compensation.”

Morgan Stanley fossil fuel financing

Despite its stated targets, Morgan Stanley is one of many banks that are still too open to financing fossil fuels, according to a recent Transition Pathway Initiative (TPI) report: it is the only non-Chinese bank that has not integrated specific sector targets as part of its overall decarbonisation strategy.

In 2023, the bank provided more than US$19 billion of funding to the fossil fuel industry – up from US$14.7 billion in 2022.