Navigating Complexity: A Client-Centric Approach to Sustainability

Today we released our 2022 Sustainability Report, and here's my letter to our shareholders: https://click.gs.com/SustainabilityReport2022

The macro environment of 2022 laid bare the challenges of navigating the climate transition. Energy prices rose suddenly when Russia launched its invasion of Ukraine, and though prices later fell toward their pre-war levels, the lesson was clear: Low investment in energy infrastructure has left regions like Western Europe vulnerable to supply shocks. The war has focused the attention of governments and businesses alike on the need to balance short-term energy demands with long?term sustainability goals.

At the same time, an increase in inflation triggering a tightening of monetary policy has made business leaders more cautious in general. The economic outlook is still unclear, and in such a complicated environment, our clients are facing new questions about how to achieve their sustainability goals.

But that’s no reason to change course. At Goldman Sachs, we’ve long believed the transition to a more sustainable economy would be a decades-long effort; to advance that transition, more risk capital must be invested in developing new, clean technologies, especially for the highest-emitting sectors; and in solving such a complex problem lies enormous opportunity for our clients. For example, our Carbonomics research team estimates that, to provide affordable energy while also pursuing decarbonization, the energy industry will need $1 trillion more in annual capital expenditures through 2026, compared to what it spent during the final years of the past decade.

And we’ve continued to help our clients capitalize on that opportunity. For example, in the area of climate transition, we advised Chevron on its acquisition of a renewable fuels producer and helped the lithium-ion battery-cell manufacturer KORE Power secure financing to build a gigafactory in Phoenix, Arizona.

We also have a long history of advancing inclusive growth. This year we marked the 15th anniversary of our 10,000 Women program, which has reached more than 200,000 women from over 150 countries. And our global finance facility, created in a remarkable partnership with the International Finance Corporation, has reached more than 164,000 women entrepreneurs and contributed to an over $4.5 billion increase in the volume of loans on-lent by financial institutions to women-owned businesses.

Building on what we’ve learned from 10,000 Women, we’ve continued to expand our entrepreneurship initiative 10,000 Small Businesses . In 2022, we committed to providing more than half the financing for New York City’s new $75 million small business loan fund. And, through our One Million Black Women initiative, we’ve committed more than $2.1 billion of investment capital and more than $23 million in grant capital to 137 organizations as of March 31, 2023.

In just three years, we’ve achieved approximately 55% of our 10-year, $750 billion sustainable finance target, and the reason clients turn to us is our data-driven, pragmatic approach. We’ve heard time and again that one of the biggest challenges our clients face is finding decision-useful data to measure their progress on their sustainability goals, and that’s why we’re helping develop an open-source platform for climate data and analytical tools to help investors assess climate risk. We also offer our clients a Carbon Portfolio Analytics tool to help investors measure and manage their carbon emissions exposure across equities and credit portfolios.

Where our people also excel is innovation. We continue to develop new commercial expertise and capabilities, ranging from sustainability-linked bonds to our nature-based solutions investment program designed with Apple and Conservation International. In every case, we take a One Goldman Sachs approach, where we listen to our clients, assess their needs and then use the full range of our resources to help.

We apply the same metrics-driven mindset to how we manage our firm’s resources. We’ve long believed you can’t improve what you don’t measure, and in this year’s report, you’ll learn more about the progress we’ve made on our 2025 operational goals and our 2030 Sustainable Finance Commitment.

Because no one company can build a sustainable economy on its own, we’re also working with the public sector to address market gaps. To advance climate transition, for instance, we need a combination of thoughtful public policy, private sector engagement and capital market solutions. And, as of November 2022, our blended finance facility, the Climate Innovation and Development Fund, which we launched with Bloomberg Philanthropies and the Asian Development Bank in 2021, completed its first two investments in sustainable transport projects in India and Vietnam.

And so, even though 2022 was challenging, I’m encouraged by how much our clients have accomplished. Our job, as we see it, is to help them achieve their objectives. And progress is never a straight line, but by helping our clients navigate such a complex environment, we aspire to be the world’s most exceptional financial institution, united by our shared values of partnership, client service, integrity and excellence.