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Goldman Sachs to reduce emissions in carbon-intensive sectors

Published on: 21 December 2021 01:00 PM
Natural gas flares are seen at an oil pump site outside of Williston, North Dakota
Natural gas flares are seen at an oil pump site outside of Williston, North Dakota

A Brief Summary

Securities and investment bank Goldman Sachs targets to reduce finance emissions in oil and gas, power, and auto manufacturing through a new series of intensity goals announced recently. The bank earlier this year pledged to align its financing activities by 2050 to achieve a net-zero pathway. Initially, the firm focuses to reduce portfolio emission intensity by 17% to 22% for the oil and gas sector, 50% to 65% for power, and 49% to 54% for auto manufacturing. The bank also communicated that it would set targets for the remaining carbon-intensive sectors in line with NZBA guidelines.

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Goldman Sachs Group Inc (GS.N) said it would work with customers in three areas to decrease carbon emissions significantly by 2030, revealing fresh details about its approach to combating climate change. The bank stated that it would first focus on oil and gas, power, and auto manufacturing, to reduce emissions in those high-emissions industries by 2030. It claimed it would help oil and gas clients reduce emissions by 17 to 22 percent, power by 50 to 65 percent, and automobiles by 49 to 54 percent, starting with 2019 levels as a baseline.

Goldman said it would explore using carbon credits if it could verify that they are of sufficient quality to meet those objectives.JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N), for example, have established comparable goals.

The targets are a reflection of how banks are putting more pressure on clients to decrease emissions as the business faces increasing worldwide pressure to stop financing industries that affect the environment, such as coal. In the study, Chief Executive David Solomon stated, "As a financial institution, we believe the most meaningful role we can play in the global climate transition is to drive decarbonization in the real economy in conjunction with our clients."

"Achieving the net-zero aim set by Goldman and other banks necessitates promptly ceasing funding for fossil fuel expansion." Anything less is a PR stunt," Sierra Club Fossil-Free Finance Campaign Manager Ben Cushing explained.

According to one of the top US bank regulators, Banks should make assessing financial risks related to climate change an intrinsic part of their business. The Office of the Comptroller of the Currency said that it was seeking feedback on draught bank supervisory principles, with a focus on institutions with more than $100 billion in assets. The draught outlined a broad vision for how banks should incorporate climate change risk into practically every element of their operations, and it is the most significant step regulators have taken to date to encourage banks to consider climate risks under the Biden administration.

In March of this year, Goldman Sachs said that it would align its financial activities to meet a net-zero goal by 2050. Thursday's report outlined the first set of 2030 goals, "focused on industries where we see an opportunity to proactively engage with clients, deploy resources, and invest in new commercial solutions," according to the study. Companies in certain areas, the bank believes, will "require enormous support through cash and strategic advice to deliver on net-zero goals," according to the bank.

According to the bank's assessment, $56 trillion in green infrastructure investments are required globally by 2050 to achieve a net-zero economy. Goldman Sachs has already begun to align its loans with a rising global campaign to reduce carbon emissions. It joined the United Nations-backed Net Zero Banking Alliance in October. Climate-focused investors are urging big US banks to immediately reduce their financing of new fossil fuel development, claiming that present commitments to reduce global emissions are insufficient.

HSBC expects all of its clients to have a plan in place by the end of 2023 to stop financing thermal coal. Leaders from around the world have emphasized the need of keeping global warming below 1.5 degrees Celsius. The Paris Agreement of 2015 pledges countries to keep global average temperature rise below 2 degrees Celsius over pre-industrial levels, with a goal of 1.5 degrees Celsius.

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