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Goldman Sachs, the banking giants, have joined the growing list of corporate multinationals entering the Environmental, Social & Governance (ESG) bonds market by issuing an $800m Sustainability Bond. It will form part of the company’s target of mobilising $750bn of green financing, investing and advisory activities by 2030.
In 2019, Goldman Sachs published their Sustainable Finance report which advocated a strategy focused on driving the global climate transition and incorporating inclusive growth strategies focused under nine thematic areas:
Waste and materials;
Clean energy
Sustainable food and agriculture
Sustainable transport
Ecosystem services
Financial inclusion
Accessible and affordable education
Communities
Accessible and innovative healthcare.
The bond has a five year term, is callable in four years and will pay interest semi-annually. Goldman Sachs intend issuing sustainability bonds every 12 to 18 months up to 2030 and will report annually on the allocation of the proceeds including expected and realised financial, social and environmental impacts. They see this as a firm commitment to their Sustainability Issuance Framework published in February 2021 which elaborates on the themes mentioned above.
The framework has a list of activities which the proceeds of their issuance are not allowed to knowingly finance. This list includes nuclear power generation, fossil fuel projects, palm oil production, carbon-intensive projects, weapons, gambling and other activities deemed beyond the pale.
The Sustainability Issuance Framework received a favourable Second-Party Opinion report from Sustainalytics – the independent provider of ESG research and ratings – on February 1st, paving the way for Goldman Sachs to announce their Sustainability Bond on February 12th.
Despite having to pay out massive settlements for their part in the 1MDB scandal in Malaysia, 2020 saw Goldman Sachs negotiate the economic and financial fall-out from the Covid-19 pandemic better than many of their peers. The company returned a 12% rise in full-year profits to $9.5bn and are now poised to follow the ESG path taken by other banks.
It has become a well-trodden route:
JP Morgan Chase & Co recently priced a $1bn social bond.
Citigroup issued $2.5bn via the sustainable bond market last October.
October also saw Morgan Stanley price $1bn of socially responsible bonds.
Prior to that, Bank of America issued $2bn of bonds which aim to advance racial equality having shown awareness of pressing global concerns by issuing a $1bn corporate bond to fund health sectors fighting Covid-19.
Globally, Moody’s sees the ESG bond market continue its growth in 2021 with projected issuances across all three strands:
$121bn of sustainability bonds,
$375bn of green bonds and
$150bn of social bonds.
Should this come to fruition, it will represent a 32% increase over the collective new issues in 2020.
Further evidence of how Goldman Sachs is embracing other tenets of the sustainability creed can be seen in the composition of new partners announced in November. The 60 making the lucrative step-up comprise the most diverse and inclusive group of new partners at the company. The 16 women constitute 27% of the new intake bringing the total female representation to 18%. The minority ethnic mix among the partners has also been increased: 29% of the new partners are classified as Black, Hispanic or Asian raising the overall total to 22%.
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