Morgan Stanley has committed to strengthening its deforestation policies for clients in several agriculture and land-use sectors, according to environment and social-focused investor Green Century Funds, who had filed a proposal for the financial services firm’s 2023 AGM.

Green Century said that it withdrew its proposal following the commitment from Morgan Stanley.

Annie Sanders, Green Century Funds’ director of shareholder advocacy, said:

“To achieve their climate reduction goals, banks will need to focus on companies that drive deforestation. With these new commitments, Morgan Stanley is taking important steps toward meeting its net-zero ambitions.”

A recent report released by the UN-backed Race to Zero found that deforestation attributable to companies with land-based value chains, particularly in the forest, land and agriculture sectors, is responsible for a significant proportion of global greenhouse gas (GHG) emissions. The sectors contribute 22% of global emissions, half of which are driven by deforestation. According to the UN Food and Agriculture Organization (FAO), an estimated 420 million hectares of forest, representing an area larger than the EU, were lost to deforestation between 1990 and 2020. Key products responsible for the majority of global deforestation include beef, soy, palm oil and wood products.

According to Green Century, Morgan Stanley agreed to enhance its current standards for palm oil and forestry clients to reflect best practices, and to create new written standards for soy and beef clients operating in regions with high deforestation risk. The firm will adopt leading “No Deforestation, No Peat, No Exploitation” (NDPE) policies. For timber clients in high conservation value forest, Morgan Stanley will require best-practice Forest Stewardship Council (FSC) certification or a time-bound plan to achieve it. The firm will also require an enhanced review of beef clients’ no-deforestation policies and practices in high-risk regions.

Green Century Funds President Leslie Samuelrich said:

“We cannot achieve global climate goals without ending deforestation in this decade. To do that, banks must help mitigate the dangers to forests and biodiversity. We are encouraged by Morgan Stanley’s steps to address these risks.”