By Bilal Hafeez 20-12-2019

Is Sustainable Finance the Next Big Commercial Opportunity? (Exchanges at Goldman Sachs)

(37 min listen)
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Summary (You can listen to the podcast by clicking here)

John Goldstein, head of Goldman Sachs’ Sustainable Finance Group, shares valuable insights and operational details on how the firm will accomplish its recently announced sustainable finance commitments. Their latest initiative is valued at $750 billion, representing the capital that will be deployed over the next 10 years in climate transition and inclusive growth. The discussion revolves around the following ideas:

• The main climate transition themes will be clean energy, waste management, and ecosystem services, while the main inclusive growth themes will be accessible education, accessible healthcare, and local community support.

• These areas are arguably seen as something outside Goldman Sachs’s current business model, but Goldstein strongly emphasises the opposite. He backs this initiative by citing the firm’s best researchers, who have qualified those themes as the main secular trends driving our economy.

• Goldstein does not link this initiative with specific environmental targets, but rather describes this as a twin commitment contribution towards a holistic change in society.

• Lastly, he shares some operational insights on how Goldman Sachs partners with companies like Enel or Volkswagen in projects directly linked to those commitments. Probably the most pressing challenge right now is designing the right incentives and accountability rules for companies in the area of green financing.

 

Why does this matter? As mentioned, ESG will be the secular trend driving the economy, so catching an insight into Goldman Sachs’ initiative is an important reveal. Along with those from the government, commitments from Wall Street banks signal the presence of both new opportunities and challenges for firms to access green finance. If the views of Goldman Sachs prove right, strong structural changes are bound to happen and almost all business models will have to adopt an ESG strategy.