In a bid to save the planet and make it more habitable, Goldman Sachs is revisiting its environmental policies with a pledge to spend $750 billion on sustainable finance-related projects over the next decade. It is also looking to adopt and implement stringent lending policies for fossil fuel companies.
According to the company, the $750 billion will be spent on activities within finance, investments, and advisory, all related to nine critical themes on climate transition. The project also covers inclusive growth finance and includes issues such as sustainable transport, food production, and accessible and affordable education.
While these are welcome developments, it is evident that these initiatives do not come early enough. As pointed out by David Solomon, CEO Goldman Sachs, “there is not only an urgent need to act but also a powerful business and investment case to do so.”
The motive behind these actions? It was reported on Financial times that “focusing on these specific goals gives us a set of metrics such as the amount of carbon reduction and the number of people served – that we can track over time, both for the companies and for ourselves.”
When it comes to creating policies, we all know it is the job of the government to establish policies and ensure these policies are followed in due course. However, the onus falls on the private sector to implement these policies. We also know that when the private sector is in driving massive changes such as the climate and energy transition, a faster turnaround is experienced.
In that vein, David Solomon insists that companies no longer have the luxury of treating climate-related issues as trivial issues. He is also of the opinion that financial institutions must support those driving change.
Climate change is a big deal and one of the most debated topics of the decade. All over the world, states, regional and federal governments are adopting innovative policies and practices geared at transforming their economies with clean energy.
Every year, about 4 9 billion tons of CO2 are released into the atmosphere. A quarter of this amount comes from North America and Europe combined. The major contributors to this nuisance are industries (32%), building (18%), and energy (11%).
If we continue at this rate, it may be the world’s end, much sooner than we can imagine. To avoid this terrifying menace, industrialized economies need to keep emissions at net-zero, by 2050. By reducing emissions to bet-zero, we stand a chance of keeping global warming under 2°C. Anything other than the and we are all going to hell in a handbasket.
To salvage this situation, Goldman Sachs released updates to its environmental policy framework, which includes austere lending policies for fossil fuel-related campaigns.
The company will no longer invest in any project that directly supports new upstream Arctic oil exploration or development or any new coal-fired power generation project unless it also includes carbon capture or other emission cutting technologies.
Before now, Goldman Sachs’ policy only restricted funding in developed countries. It was also revealed that they would not support thermal coal mine developments but will work with mining companies to diversify and reduce emissions. They intend to use a company’s progress in reducing emissions as a critical metric when considering future projects to finance.
The global market had seen an upsurge in green and sustainable energy as a bid to improve the climate. Institutions are also pursuing different interests in driving sustainability and climate-friendly projects. Financial institutions such as the Inter-American Development Bank (IDB) have also issued bonds and continue to provide more funding for drivers of sustainable energy.
Bottom-line, there are many key players, making impactful moves in climate transition projects. Some of these projects Tower Goldman Sachs investments and make their figures seem insignificant.
Goldman Sachs may not even be trusted to deliver on their promises, as they make what seems like a half-hearted commitment in pushing the climate transition initiative.
Besides the initiatives earlier discussed, the company has made it clear that they do not intend pulling back from the fossil fuel industry more broadly. Goldman Sachs will continue to support clients in transactions that are important to economic activities, even if it means a continued production of fossil-based fuels, airplanes, cars, and industrial goods. The declaration base by the CEO negates the policies they claim to be putting in place to reduce fossil fuel consumption globally.