On Monday, The Goldman Sachs Groupreleased its ambitious new Environmental Policy Framework, which includes bold targets and initiatives related to climate-change mitigation, adaptation, risk management, and operational impact. The company reports it is on schedule to be the first U.S. investment bank to be carbon neutral across its operations and business travel by the end of 2015, and has already invested $37 billion in clean energy since setting its $40 billion capital deployment goal in 2012.
Goldman Sachs announced that it will expand its target for clean energy to $150 billion in financing and investments by 2025. The banking giant will also help deploy clean energy solutions to underserved markets through the launch of a Clean Energy Access Initiative. By 2020, Goldman Sachs plans to invest an additional $2 billion in “green” operational investments, source 100 percent of its global electricity from renewables, and divert 100 percent of its waste from landfills.
The new Environmental Policy Framework comes 10 years after the release of the original in November 2005. Goldman Sachs’ highlighted achievements from the past decade include:
- $65 billion of clean energy financing and investment;
- $14 billion of weather-related catastrophe bonds;
- $3 billion of green investments in Goldman Sachs’ own operations;
- $13 million in funding for partnerships focused on clean energy, energy efficiency, forests, carbon policy, and water through the company’s Center for Environmental Markets Partnerships (the new framework allots an additional $10 million in grants through the Center);
- 40 percent performance improvement among GS SUSTAIN Focus List companies over the broader market (GS SUSTAIN is a global, long-term investment research strategy that integrates environmental, social, and governance factors, and now covers more than 3,300 companies); and
- Expansions to the green bond market including the first century green bond for DC Water, the first green energy market securitization for Hawaii, the first Latin America renewable project bond for Energía Eólica, and the first floating rate green note for The World Bank.
The new Framework also includes new criteria for project financing. For palm oil projects, Goldman Sachs will not finance companies or projects that participate in illegal deforestation and will require clients to obtain Roundtable on Sustainable Palm Oil (RSPO) or a comparable certification and commit to no net deforestation, no peatland development, and no human rights violations.
“Environmental issues have become increasingly relevant to our clients and our investors, and have become core to our business,” said Kyung-Ah Park, Head of Goldman Sachs Environmental Markets. “We are leveraging the talents of our people and the breadth of our businesses to facilitate the transition to a low-carbon future and promote sustainable economic growth.”
However, the new Environmental Policy Framework allows for “selective” investments in new coal-fired power generation in developing economies where “access to affordable energy is necessary for economic growth and poverty alleviation,” subject to enhanced due diligence. If “carbon capture and storage or equivalent carbon-emissions reduction technology,” is to be used, Goldman Sachs may agree to finance coal-fired power generation projects in the U.S. and other developed economies. No new projects that include mountaintop removal (MTR) mining will be financed, and U.S. coal companies that currently use MTR mining will not receive financing unless they can prove they will permanently reduce MTR coal production “over a reasonable timeframe.” Fracking and oil sands projects will also be subject to enhanced due diligence.
“It is encouraging that the new Environmental Policy Framework from Goldman Sachs acknowledges the bank’s responsibility to address climate change. However, on the critical issue of financing coal, the bank is playing catchup with half-measures at a time when leadership from major financial institutions is critically needed,” Ben Collins, Senior Research and Policy Campaigner for Rainforest Action Network, said in response to the new policy. “Providing financing for new coal mines and power plants is simply incompatible with keeping our planet below two degrees of warming. With the Paris climate summit just weeks away, it’s past time for the bank to end its financing for coal, period.”