Predicting climate chaos, Morgan Stanley touts air conditioning profit potential

This is disaster capitalism at its worst.

Last week, E&E News reporter Corbin Hiar unearthed an obscure but important research report from Morgan Stanley, one of the largest banks in America and one of the world’s biggest funders of fossil fuel projects.

In that report distributed March 17, Morgan Stanley analysts told investor clients that they believe the world is hurtling toward one of the most dangerous, terrifying global warming scenarios imaginable.

“We now expect a 3°C world,” the analysts wrote, citing “recent setbacks to global decarbonization efforts.”

The analysts didn’t describe what a 3°C world actually means, so here’s the gist. A world warmed by 3°C is one that’s rapidly falling apart. Every single coral reef in the ocean is dead. Entire regions of the world are too hot for human life. Nature is continuously throwing tantrums—droughts, wildfires, powerful storms, and unimaginable rain, location depending. There are food shortages and mass extinctions. Up to 40 percent of the world’s economy is wiped out.

There is, however, at least one good thing about a 3°C world, according to the Morgan Stanley analysts.

Air conditioning stocks are gonna go nuts.

“We expect cooling—critical to human health and productivity in many climates—to be a potent long-term growth theme,” the analysts wrote. As the world gets hotter, they predicted, the global air conditioning market could grow by 41 percent by the end of the decade, up to $331 billion. The analysis also “outlines several dozen air conditioning businesses around the world that are likely to profit from a hotter world,” wrote Guardian reporter Oliver Milman, who also obtained the report.

To be fair, Morgan Stanley would almost certainly dispute my characterization of their report. “I would not characterize our view being that ‘climate change brings many upsides,’” Stephen Byrd, Morgan Stanley’s global head of sustainability research, told Milman.

So how would Byrd characterize the bank’s view? “I would instead suggest that we will see large volumes of capital deployed to mitigate the impacts of climate change,” Byrd said, “and cooling (among other products, such as smart power grids) would be one such category of increased capital allocation.”

I’m no investing expert, but my rudimentary understanding is that in banking, more money = good. It’s somehow hard for me to believe that Morgan Stanley would tell its clients about the potential near-doubling of a multi-billion dollar market in the next five years if they didn’t believe this was somewhat positive.

But overall, it seems Byrd wants us to believe that Morgan Stanley has no moral attachment to this finding; that they are simply reporting what they see and telling their clients, as is their obligation. What he likely doesn’t understand is that the bank’s air of detachment is precisely what that makes this report so nauseating. Because Morgan Stanley is in no way detached from the future outcome of climate change. Indeed, if the world does reach 3°C, it will be in part because of them.

Morgan Stanley has invested more than $183 billion in fossil fuels in 2016, according to the latest Banking on Climate Chaos report. This makes it the 15th largest private financier of fossil fuels in the world since the Paris Climate Agreement was signed. The bank is also the sixth largest financier of fracked methane gas, one of the biggest drivers of fossil fuel emissions in the last decade. (In case you forgot, fossil fuels are responsible for more than 75 percent of the emissions that cause climate change).

Morgan Stanley knows these investments cannot continue if the world is to preserve a safe climate. That’s why in 2021, it made a pledge to significantly rein them in. The bank was one of the founding members of the Net Zero Banking Alliance, a United Nations-backed coalition of banks worldwide committed to “[aligning] lending and investment portfolios with net-zero emissions by 2050.” Doing this by necessity would mean phasing out funding of new fossil fuel projects, as there is no other way to reach net zero emissions by 2050. By joining the NZBA, the bank was also committing to some level of third-party accountability for meeting those promises.

But four years later, it feels like joining the NZBA was simply a ruse to get everyone off banks’ backs for a while. Because from 2022 to 2023, Morgan Stanley actually increased its annual funding of fossil fuels, from $14.7 billion to $19.1 billion. In addition, in 2024, researchers from MIT released an analysis of bank behavior since signing the pledge. The result: “Our evidence suggests that NZBA banks are neither divesting nor engaging differently from banks without a commitment.”

And now that Donald Trump is in the White House, banks like Morgan Stanley have a perfect excuse to act like the planet’s future is out of their hands. Shortly before Trump’s inauguration, Morgan Stanley left the NZBA without providing a reason—as did many of its peers with even larger yearly investments in fossil fuels. To soften the blow, Morgan Stanley put out a statement promising that its “commitment to net-zero remains unchanged.” Its website says the bank still has aggressive climate targets it intends to hit.

But the air conditioning stock analysis directly contradicts that promise. “The idea that you're seeing Morgan Stanley say ‘We expect a 3°C world,’ that in itself is projecting a future in which they are planning to continue to fund fossil fuel infrastructure,” said Colin Rees, the U.S. program manager at Oil Change International and co-author of the Banking on Climate Chaos report. “They’re saying, ‘We anticipate business as usual.”

It is true that banks are increasingly under pressure from the Trump administration and Republicans to abandon their climate commitments. Even before Trump took office, House Republicans had launched probes alleging that companies engaged in climate-conscious investing are violating U.S. antitrust and consumer protection laws.

But if any institution on Earth had the power not to bow to oligarchs, it would be the massive private banks that hold everyone’s money. Morgan Stanley and its peers had a choice: They could either stop destroying the planet, or they could stay out of trouble with Trump. The companies chose the latter, and now Morgan Stanley is taking the next logical step under disaster capitalism: investing big in air conditioners.

The future Morgan Stanley is predicting doesn’t have to be the case, Rees argues. “We certainly can still reach 2°C if we’re actually committed to it,” he said. But “committing to it” means that large private financial institutions like Morgan Stanley would have to actually stick to their commitments and stop funding new fossil fuel infrastructure. And that requires massive public pressure.

”There needs to be a lot of strong pushback to statements like this, which may be couched in boring financial language, but are actually revealing a deeply evil plan and abdication of any responsibility,” he said. “And that's our money. This is money that normal people around the world are investing in these banks. And they’re using it to invest in fossil fuels.”

“Hypocrisy doesn’t do it justice, because it doesn’t capture the evilness of what they’re actually talking about and doing here,” Rees added. “The fact that they’re able to walk around and be taken seriously and seen in polite company is just egregious.”

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Other stories I’m following:

• Trump has cancelled a key contract for a massive Congressionally-mandated climate science report—potentially based on a laughably stupid story by the Daily Wire. From the New York Times:

  The contract cancellation came a day after The Daily Wire, a conservative news website, reported on ICF’s central role in helping to produce the National Climate Assessment in an article titled “Meet the Government Consultants Raking in Millions to Spread Climate Doom.”

  The Daily Wire article claims the contractor is “highly partisan” because of one of the two employees is a climate scientist who lists her pronouns in her Instagram bio.
  

• Trump misrepresents facts about coal as he signs executive orders to boost its use. From the Associated Press:

  President Donald Trump on Tuesday signed four executive orders designed to boost the U.S. coal industry, outlining steps to protect coal-fired power plants and expedite leases for coal mining on U.S. land. But in touting the benefits of coal, he misrepresented several aspects of its safety and use.

  In summary, coal is not clean; coal is not cheap; the amount of untapped coal in the ground is not nearly as valuable as Trump claims; and Germany is not building new coal plants.
  

• Trump pushes coal to feed AI power demand. From Axios:

  The White House is seeking to lean on coal-fired power —which has been in a steady decline in the U.S. over the last 15 years—to feed rising energy demand driven by artificial intelligence.

  Dedicated HEATED readers know we called this months ago, albeit for Bitcoin mining. But these are all the same people.
  

• She inspired laws to hold the fossil fuel industry accountable. Now fossil fuel groups are targeting her. From the New York Times:

  Fresh out of law school in 2022, Rachel Rothschild wrote a memo laying out the legal justification for a new strategy to fight climate change: States could force oil and gas companies to pay for the damage caused by extreme floods and wildfires that are made worse by the use of their products.
  

  Ms. Rothschild’s work was foundational. It provided the basis for the nation’s first “climate superfund” laws, which were passed in New York and Vermont last year and could be adopted by as many as six more states as soon as this year. If implemented, they could cost oil companies billions of dollars.
  

  Her work made Ms. Rothschild a target. She is one of a number of lawyers, law professors and judges who have been the focus of a campaign to discredit them led by a conservative group with ties to the fossil fuel industry and the Trump administration.

  This probably feels like bad news to most of you, but I consider it a sign that these laws actually might have real power to draw down fossil fuel emissions. The industry wouldn’t be so aggressive about it otherwise.

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Catch of the Day: If this tiny unnamed tiger can muster the strength listen to this guy lie about climate change, you can too. (But it’s OK if you choose not to).

Thanks to reader Ellie for the submission.

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