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Top Wall Street institutions are preparing for a severe future of global warming that blows past the temperature limits agreed to by more than 190 nations a decade ago, industry documents show.
The big banks’ acknowledgment that the world is likely to fail at preventing warming of more than 2 degrees Celsius above preindustrial levels is spelled out in obscure reports for clients, investors and trade association members. Most were published after the reelection of President Donald Trump, who is seeking to repeal federal policies that support clean energy while turbocharging the production of oil, gas and coal — the main sources of global warming.
The recent reports — from Morgan Stanley, JPMorgan Chase and the Institute of International Finance — show that Wall Street has determined the temperature goal is effectively dead and describe how top financial institutions plan to continue operating profitably as temperatures and damages soar.
“We now expect a 3°C world,” Morgan Stanley analysts wrote earlier this month, citing “recent setbacks to global decarbonization efforts.”
The stunning conclusion indicates that the bank believes the planet is hurtling toward a future in which severe droughts and harvest failures become widespread, sea-level rise is measured in feet rather than inches and tropical regions experience episodes of extreme heat and humidity for weeks at a time that would bring deadly risks to people who work outdoors.
The global Paris Agreement, from which the U.S. is withdrawing under Trump, aims to limit average temperature increases to well below 2 degrees Celsius. Scientists have warned that permanently exceeding 1.5 degrees — a threshold the world breached for the first time last year — could lead to increasingly severe climate impacts, such as the demise of coral reef ecosystems that hundreds of millions of people rely on for food and storm surge protection.
Morgan Stanley’s climate forecast was tucked into a mundane research report on the future of air conditioning stocks, which it provided to clients on March 17. A 3 degree warming scenario, the analysts determined, could more than double the growth rate of the $235 billion cooling market every year, from 3 percent to 7 percent until 2030.
“The political environment has changed, so some of them are conforming to that,” Gautam Jain, a former investment banker who is now a senior research scholar at Columbia University, said of Wall Street’s increasingly dire climate projections. “But mostly it is a rational business decision.”
The new warming estimates come as heat-trapping gases continue to rise globally and as international commitments to limit the burning of oil, gas and coal that’s responsible for the bulk of emissions have stalled. Meanwhile, megabanks like Wells Fargo are backsliding on their previous climate pledges and exiting from the Net-Zero Banking Alliance, a United Nations-backed group that encouraged members to slash their emissions in line with the Paris Agreement.
Morgan Stanley, which in October watered down its climate-related lending targets, declined to comment.
Betting on potentially catastrophic global warming is both an acknowledgment of the current emissions trajectory and a politically savvy move in the second Trump era, according to Jain.
“Nobody wants to be seen as going against” the administration’s pro-fossil-fuel energy policy, he said. “These banks are businesses, so they have to look at the risk that they have in their portfolio and the opportunities that they see in the most likely environment.”
‘Recalibrate targets’
Morgan Stanley’s frank assessment of the air conditioning market follows a trade association briefing in February in which industry officials argued that the financial sector needs a coordinated messaging campaign to regulators, investors and the public that the Paris targets are no longer within reach — and banks should not be expected to pursue them.
“The world is not on track to limit temperature rise below 2°C — and limiting warming [to] 1.5°C is almost certainly unachievable,” the Institute of International Finance wrote in bolded text, citing analyses from the energy research firm the Rhodium Group and the Climate Action Tracker, an environmental collaborative.
“Financial institutions need to recalibrate targets to reflect that 1.5°C are no longer suitable as strategic goals,” the briefing said. “Reputational concerns may arise in the absence of an aligned view amongst stakeholders on how such processes should be handled, and what criteria may need to be applied.”
The banking industry can support the transition from fossil fuels to clean energy but capital will only move “at scale when the economics make sense,” Mary Kate Binecki, a spokesperson for the Institute of International Finance, said in an email. The institute represents about 400 members from more than 60 countries, including JPMorgan and Morgan Stanley.
JPMorgan, the world’s most valuable bank, has been describing to investors how it evaluates climate risks in a detailed report published annually since 2022. At that time and in subsequent reports, the bank said it vets investments using “baseline” scenarios that assume global warming of 2.7 degrees to more than 3 degrees by the end of this century.
In JPMorgan’s most recent report, released in late November, CEO Jamie Dimon outlined the bank’s commitment to financing a global transition to cleaner energy. But he also hinted at the role Trump and other political leaders could play in slowing climate progress.
“Constructive government leadership and policy is also necessary, particularly on taxes, permitting, energy grids, infrastructure and technological innovation,” Dimon said in a foreword to the report.
A JPMorgan spokesperson emphasized that, while the bank stress tests its investments using a variety of potential climate scenarios, it remains committed to zeroing out its emissions by 2050, in line with the Paris Agreement.
Wall Street knows how to run the numbers, and right now the smart money expects warming to exceed 2 degrees, explained Jain, the former investment banker.
“These guys are not making assumptions out of the blue,” he said. “They are following the science.”
Correction: An earlier version of this report misstated when JPMorgan published its first climate report. The initial edition ran in 2019, was included in its broader environmental, social and governance reports for a couple of years, and then became a standalone publication again in 2022.
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