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Navigating Carbon-Aware Portfolio Management

2:20 min read

Interest in investing in low-carbon technologies and decarbonization solutions continues to grow among investors. While many factors contribute to the momentum behind climate transition as an investment theme, key drivers include more commitments to “net-zero”, improving economics for renewable energy production, and rising economic and humanitarian consequences of climate change. To put into perspective just how significant the sustainable investing space is becoming, Goldman Sachs Global Investment Research (GIR) estimates the government, public and private investment in green capex will need to total $6 trillion to meet global net zero, clean water and infrastructure-related UN Sustainable Development Goals by 2030¹. This combination of climate transition risks and opportunities creates a unique backdrop against which investors can evaluate their portfolios.

Accelerating the climate transition – or decarbonizing the global economy -- is one of two key pillars in Goldman Sachs’ commitment to sustainable finance, the other being inclusive growth. In order to deliver this pillar to our clients, we have developed a four-step framework to build a carbon-aware investment portfolio: understand, reduce, invest and offset.

Goldman Sachs Approach to Carbon-Aware Portfolio Management:

  • Understand: Learn about the emissions financed by your portfolio.  Goldman Sachs offers clients a public market ESG Portfolio Diagnostic to measure the carbon intensity and footprint of their existing portfolio. Through the tool, they can evaluate emissions at the portfolio- and strategy-levels.
  • Reduce: Identify potential areas of improvement and seek out alternatives that maintain similar investment objectives but with lower exposure to carbon intensive sectors.
  • Invest: Seek out opportunities for proactive investment in the climate transition. Goldman Sachs offers a number of public and private market strategies focused on financing decarbonization and clean tech solutions.
  • Offset: Finally, for clients that want to go beyond portfolio implementation, Goldman Sachs has vetted a number of carbon offset providers that can be engaged, to the extent there is interest in offsetting remaining financed emissions.

At Goldman Sachs, we aim to educate our clients on the complexities of the climate transition and addressing carbon emissions financed by their investment portfolio.  We leverage available data, research and robust manager diligence capabilities from across the firm to inform our portfolio implementation recommendations and carbon-aware portfolio management framework. Our framework helps clients understand the current emissions associated with their portfolio, reduce the emissions exposure of their current holdings, invest in decarbonization solutions and navigate carbon offset markets to achieve a more carbon-conscious portfolio that is unique to the financial needs and sustainability goals they want to achieve.

If you are interested in discussing Carbon-Aware Portfolio Management, reach out to your Goldman Sachs representative today.

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¹ Goldman Sachs Global Investment Research, “Green Capex: Greenflation, Returns and Opportunity,” p. 10, June 2022

 

 

This material is intended for educational purposes only and is provided solely on the basis that it will not constitute investment advice and will not form a primary basis for any personal or plan’s investment decisions. While it is based on information believed to be reliable, no warranty is given as to its accuracy or completeness and it should not be relied upon as such. Goldman Sachs is not a fiduciary with respect to any person or plan by reason of providing the material herein, information and opinions expressed by individuals other than Goldman Sachs employees do not necessarily reflect the view of Goldman Sachs. This material may not, without Goldman Sachs’ prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient. This material is not an offer or solicitation with respect to the purchase or sale of any security in any jurisdiction. Investing involves risk, including the potential loss of money invested. Past performance does not guarantee future results. Neither asset diversification or investment in a continuous or periodic investment plan guarantees a profit or protects against a loss. Information and opinions provided herein are as of the date of this material only and are subject to change without notice.


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