Sustainable, Responsible &/or ESG Policy:

We would categorize the GS Europe Sustainable Equity as an ESG enhanced offering. We define ESG enhanced funds as one where ESG factors are part of their research and where non-financial factors are deemed relevant to the risk-return profile of the respective business model. In instances where such considerations have been determined to be material, portfolio managers may leverage proprietary portfolio construction tools to reflect the conclusions of the assessment through the sizing of positions in the final portfolio. The ESG characteristics of a company are considered as part of our assessment of quality and ESG factors are considered within portfolio construction and risk management. The portfolio makes disclosures under Article 8 of the EU Sustainable Finance Disclosure Regulation.

Goldman Sachs Europe Sustainable Equity uses active management to target companies with sustainable business models, focusing on products and services delivered, with maximum stock level overweight limits maintained relative to the benchmark. The fund also aims for lower carbon intensity than the benchmark.

ESG Screening / Exclusionary Framework

We apply exclusion filters to our initial European investment universe to screen out business activities that we deem as causing significant harm and remove companies which behave in a manner inconsistent with recognized global standards around good corporate citizenship. Our restriction criteria enable us to take a stance on activities and behaviour that do not match with our ethics and principles. As part of the firm’s broader commitment to promote ESG characteristics across its portfolios, the SICAV fund is Article 8 compliant based on the European Union’s Sustainable Finance Disclosures Regulation guidelines (SFDR). Moreover, the portfolio has the label Towards Sustainability (Belgium).

ESG Integration

The portfolio is managed with a bottom-up approach, focuses primarily on assessing the underlying intrinsic value of a business and is actively searching for companies that can produce sustainable returns on invested capital. As such, companies that exhibit low commitment to the environment, weak labour practices and poor corporate governance would tend to show limited upside in our fundamental analysis. The consideration of non-financial factors, including environmental, social, and corporate governance practice, can be a valuable way to identify key risk and return drivers for our investments. Adherence to best practices in the ESG areas can help support a company’s efforts to minimize costs and liabilities and enhancing its profitability and competitive positioning. When evaluating companies and meeting with management teams, we believe that a proactive focus on sustainability can be an indication of a strong corporate strategy and a reliable business model. Strong ESG characteristics can help reinforce our conviction around the quality and robustness of a company’s business model and identify potential risks to the sustainability of a company’s profits. We employ a proprietary approach that integrates material ESG factors into our financial  analysis with the goal of investing in high return businesses and mitigating risk. At the stock-level, we consider material ESG factors on a case-by-case basis, building a proprietary ESG Scorecard and an internal ESG Rating for every company that is under consideration for the portfolio.

Goldman Sachs Asset Management may invest in a security prior to completion of the ESG scorecard. Instances in which ESG scorecards may not be completed for a specific security prior to investment include but are not limited to IPOs, in-kind transfers, corporate actions, and/or certain short-term holdings.

Financial Materiality

Our ESG assessment is based on the concept of financial materiality – a focus on an extensive list of E, S & G factors that our analysts have identified as relevant to each company and the industry in which they operate. We have adopted the Sustainability Accounting Standards Board (SASB) framework as a starting point for our assessment of ESG materiality, which is further complemented by our proprietary internal research. In our opinion, SASB has now become the industry standard in helping asset managers and clients identify ESG and sustainability issues that impact long-term value creation and communicate sustainability data more effectively. The following link shows the SASB Materiality Map (https://materiality.sasb.org/) that we use extensively in determining key issues that maybe material to a company based on the industry in which it operates. We use this map to help us identify sustainability issues that are likely to affect the financial condition or operating performance of companies within that particular industry. Under the 26 key areas highlighted by the SASB Materiality Map, we have identified close to ~65 KPIs as a part of our ESG Scorecards, for the quantitative/ qualitative assessments of companies to help determine our ESG views.

ESG Scorecards

Along with the traditional valuation models, our research analysts are required to conduct an in-depth ESG assessment by preparing an ESG Scorecard for each company that is held within the portfolio. Governance forms the foundation of our analysis and is evaluated universally across sectors. We look at questions related to board quality, management quality, risk management, executive compensation, diversity, and minority shareholder rights to evaluate governance. The analysis of material environmental and social factors varies depending on the sector the company operates in. We would not only focus on investing in companies that we consider as having “best in class” ESG credentials, but also those that are showing a proven commitment to improving their ESG footprints.

The Scorecard, which sits within Concert (our internal investment platform), forms the basis for stock level due diligence and provides a standardized framework for conducting a baseline assessment of a company’s ESG characteristics relative to peers. The Scorecard pulls in time series data from third-party providers like MSCI, Bloomberg, Institutional Shareholder Services (ISS) and others, providing us a range of ESG metrics to assess a firm’s growth, profitability, and risk management profile. However, this is merely the starting point for a more holistic assessment, and our analysts are encouraged to fill in data gaps, challenge third party inputs and use their intimate company knowledge derived from direct engagements to enhance their fundamental analysis. Once the Scorecard is completed, our analysts will capture their results in a qualitative rating compared to its industry peers, which can help them form an opinion about the overall ESG risks as well as any specific ESG concerns. The ratings are on a scale of 1 to 5, with 5 – Leader, 4 – Better than peers, 3 – In-line with peers, 2 – Lower than peers, 1 – Laggard. In situations where our internal ESG analysis differs meaningfully from third-party providers, the reporting analyst has to justify holding that name from an ESG standpoint and provide conclusive evidence on the scorecard.

Integration of Climate and other ESG Themes

We are increasingly focused on carbon footprint within our portfolios and are both willing and able to scale down emissions as required. We have strong experience in the field and are also working closely with clients focused on this issue as part of either their IIGCC membership or “Net Zero Investment Framework” sponsorship, alongside Net Zero Asset Owner Alliance Membership.

We aim to manage the Europe Sustainable Equity portfolio ensuring that our ESG objectives are met – Higer ESG Rating and lower scope 1 & 2 carbon intensity than the benchmark. We firmly believe that as an active bottom-up investor with a long-term investment horizon, a company’s growth prospects might be meaningfully impacted by its sustainable business practices and its role in driving the global transition toward a carbon free economy. From a climate change risk perspective, we acknowledge that a heavily carbon intensive business is exposed to a certain level of risk to experience a higher cost of capital in the future. We do not always anticipate this risk to materialize over the short-term but need to factor in the probability that heightened regulatory scrutiny, changing consumption patterns and tougher carbon legislation (i.e., transition risk) might negatively affect the business in the long run.

As a result, we have included carbon focused risk metrics, sourced from MSCI, into our daily risk reporting to ensure our portfolio management and broader investment team is able to monitor the carbon exposure of the portfolio at the aggregate as well as the single holdings level. The portfolio managers of the portfolio have daily visibility on the carbon footprint / climate risks of the portfolios and can decipher how much a single holding contributes to said risk factor and how this exposure would change after the implementation of certain trades. We are able to monitor both carbon emissions and intensity for Scope 1,2 &3 emissions.  

Process:

Our investment process comprises four iterative steps, as illustrated below: (ESG screening, financial screening, fundamental and ESG analysis, and portfolio construction). The resulting portfolio is monitored for ESG characteristics and is subject to active stewardship.

Our four-step investment process is described below[1]

Source: Goldman Sachs Asset Management as of 31 December 2024.

Step 1. ESG Screening

We apply exclusion filters to our initial European investment universe to screen out business activities that we deem as causing significant harm and remove companies which behave in a manner inconsistent with recognized global standards around good corporate citizenship. Our restriction criteria enable us to take a stance on activities and behaviour that do not match with our ethics and principles.

 Norms-and activity based ESG Screening[2]

 The below shows the excluded activities and behaviour.

Exclusions and revenue thresholds in more detail:

• Oil & gas exploration/production (>5%)
• Arctic oil & gas, and oil sands (all)
• Thermal coal mining(>5%)
• Palm oil production & trading (all)
• Alcohol (>5%)
• Gambling (>5%)
• Adult entertainment (>5%)
• For profit prisons (>5%)
• Controversial weapons (all)
• Weapons/civilian firearms (>5%)

Global norms

Our Global Stewardship Team has developed a process for evaluating companies that have been identified by third party data providers as in violation of the UN Global Compact Principles and the OECD Guidelines for Multinational Enterprises (amongst other global norms), and/or companies which are applying poor governance practices. The team evaluates each of the issues raised at the companies, considering the external data providers’ assessment as well as additional sources. If they believe a company has an ongoing global norms violation with insufficient remediation, it will be excluded from our investment universe.

Step 2. Financial Screening

During the financial screening stage of the investment process, we assess economic profit and search for high-quality, sustainable business that have compounding characteristics with relatively high and relatively stable cash flow return on investment (CFROI). This can be achieved thanks to market leadership and strength of competitive position, high level of sustainable asset growth based on internally generated cashflows (low leverage) and strong business momentum with management alignment and quality accounting practices (clean earnings results).

We summarise this stage with the below illustration.

Source: Goldman Sachs Asset Management, HOLT, data as of September 2024

We search for companies generating and delivering CFROI above their cost of capital and above the average return of the benchmark. We screen for companies that are attractive on quality, valuation and momentum characteristics.

Quality, sustainable businesses that screen well in this stage might have compounding characteristics due to:

• A high and stable level of return on invested capital due to a strong and difficult to displace market position
• A high level of sustainable asset growth based on internally generated cashflows
• Strong business momentum with low leverage, quality accounting and aligned management incentives

Step 3. Fundamental & ESG analysis

Our fundamental analysis is based on a value-chain perspective. We aim to identify parts of a value chain that are well-positioned to benefit from favourable social and/or environmental trends. Within these parts we look for segments where companies are potentially able to earn a healthy return on capital. This can amongst others be driven by technology leadership, a unique (branded) consumer offering, cost leadership or a platform, network or scale benefit. We aim to assess whether the business model provides a sustainable solution and if the company at the very least does not harm its stakeholders or society at large with its operations and products.

Next, we identify a corporate’s life-cycle stage. Start-up companies can be interesting but are often unproven and tend to be high-risk investments. We believe that opportunities for structural stock picking success of companies in this phase is low. Further down the corporate lifecycle mature companies and restructuring companies can have market positions at risk, resulting in declining top-line growth and falling CFROI. Our preferred positioning in the corporate life cycle is in the growth and fade phase in which top-line growth is often high to reasonable, while CFROI can be high. In these stages, the creation of economic profit can be high, which can result in attractive corporate wealth creation.

Longevity of economic profit is the key concept for investments that can compound over a long-time horizon. To assess the durability of economic profit we look for strengths, weaknesses, opportunities and threats (SWOT) within the external and internal forces that could affect the corporate position. Here we pay special attention to the more intangible factors. Social and environmental elements don’t only influence internal processes and employees but can also impact external value chains and/or consumer preferences.

Next, we make a corporate valuation analysis using our proprietary financial modelling tool. Within our assumptions, we take into account if our revenue, margin or cost of capital assumptions need to be adjusted for potential intangible factors. If market expectations are low versus our fair assumptions an opportunity seems to emerge for an attractive investment.

The below example illustrates the benefits of a cross-industry perspective.

Source: Goldman Sachs Asset Management, as of April 2025

ESG analysis

We believe ESG factors have a strong influence on intrinsic company values that are not fully recognized by the market. These factors help identify corporate opportunities, threats, strengths, and weaknesses; and help generate a complete analysis of corporations. Our analysts’ fundamental approach takes ESG factors into account. We split ESG factors into those that can be quantified, and those that are harder to quantify. If ESG risks/opportunities can be quantified, and a financial value estimated the financial/valuation model can be adjusted directly. If ESG risks/opportunities are hard to quantify/not quantifiable (in terms of size or timeline of impact), these can be: 1) qualitatively included in the investment case (e.g., integrating into market dynamics or SWOT analysis), or 2) integrated into the intrinsic valuation (e.g., adjusting the cost of capital) or relative valuation (e.g., applying premium/discount to the 1-year forward price/earnings ratio)

The approach of analyst team to ESG integration can be summarized as follows:

Identify

• Identification of material ESG issues
• Assess impact on future business potential & stakeholders
• Identify ESG data providers

Assess

• Understand company’s absolute & relative (vs sector) performance on ESG issue
• Understand company’s potential controversies related to material ESG issues

Integrate

• Incorporate ESG analysis in the investment case
• Translate ESG analysis (risks & opportunities) into impact to Fair Value estimate

Our research analysts are supported by Goldman Sachs Asset Management’s proprietary ESG assessment framework. The ESG assessment, which is embedded in our in-house centralised investment platform, forms the basis for stock level due diligence and provides a standardized framework for conducting a baseline assessment of a company’s ESG characteristics relative to peers. The ESG assessment framework pulls in material, time series data, based on materiality mapping, allowing us to focus on ESG factors that we believe are meaningful to a firm’s growth, profitability, and risk management profile. However, this is merely the starting point for a more holistic assessment by our analysts who will look to fill in data gaps, challenge third-party inputs and use their intimate company knowledge derived from direct engagements to enhance their fundamental analysis. Once the ESG assessment is completed, our analysts will generally capture their results in a qualitative rating which may have implications for a stock’s inclusion in the final portfolio.[3]

Concert

Concert, among other things, houses our proprietary ESG assessment framework, which includes proxy voting records, engagement information, and company or issuer specific ESG data. The platform which facilitates content management, workflow and screening for research analysts and is used as a centralized repository of all external and internally generated research. Research can be stored and retrieved in a variety of ways, including ticker symbol, analyst name, investment theme, source, sector or country, making it seamless for our team members to share and retrieve all information on a company, sector or topic and further enhancing the communication lines within our teams. Additionally, analysts and all our investment teams across asset classes can access ESG news and research, engagement as well as proxy voting records via Fluent to further enhance their views and allow for effective and coordinated corporate engagement.

Step 4. Portfolio Construction

The objective of the Goldman Sachs Europe Sustainable Equity strategy[4] is to generate alpha by constructing a diversified portfolio of 30 to 50 high-conviction holdings where the largest contribution to stock selection returns is from idiosyncratic (stock-specific) risks, rather than style or macro factors. Portfolio holdings are then subject to a risk control filter. Overweight positions in companies and sectors are capped to certain levels for risk diversification purposes.

Diversification does not protect an investor from market risk and does not ensure a profit.

Whether the portfolio managers will overweight a certain sector or country is dependent on bottom-up valuation    and attractiveness of individual stocks at a given time. Therefore, sector and country allocations are a direct result of the bottom-up stock selection process.

In portfolio construction we aim to select a portfolio with an attractive combination of sustainable characteristics, financial strength and compounding potential, within a robust risk framework. Our portfolio construction starts from a bottom-up stock picking perspective. As a result of this, we aim to construct a portfolio comprised of companies that possess characteristics such as: positive ESG momentum, sound corporate governance, absence of serious and structural ESG controversies, low carbon- water- and waste- footprints, attractive financial metrics (healthy CFROIs and sustainable asset growth, accounting quality and financial leverage), adequate market capitalisation and liquidity and a favourable corporate life-cycle position.

Sell discipline

Portfolio managers will generally sell out of a position if the investment case has played out or has been broken due to the emergence of new facts. Furthermore, a sell can be triggered by an analyst and/or portfolio manager view change.
More broadly, our sell discipline can be described as follows:

1. Gradual changes – changes in stock positions that are generally a result of a change in conviction. This may be due either developments in the earnings outlook or a change in relative valuation;
2. Abrupt changes – may be required when companies announce negative news of a more structural nature, including ESG-related behaviour.

Any change to an analyst recommendation are always documented in Concert.

[1] The information contained on this process chart does not reflect binding characteristics of the portfolio for the purposes of the EU Sustainable Finance Disclosure Regulation (“SFDR”). There is no guarantee that objectives will be met. Complete information on the risks of investing in the Fund are set out in the Fund’s prospectus.

[2] The information contained on this illustration does reflect binding characteristics of the portfolio for the purposes of the EU Sustainable Finance Disclosure Regulation (“SFDR”).

[3]  For illustrative purposes only. Goldman Sachs Asset Management in its sole discretion and without notice may periodically update or change the process for conducting its ESG assessments and implementation of its ESG views in portfolios, including the format and content of such analysis and the tools and/or data used to perform such analysis. Accordingly, the type of assessment depicted here may not be performed for every portfolio holding. No one factor or consideration is determinative in the fundamental research and asset selection process.

[4] There is no guarantee that objectives will be met. Your capital is at risk and you may lose some or all of the capital you invest. Diversification does not protect an investor from market risk and does not ensure a profit.

Resources, Affiliations & Corporate Strategies:

Resources & Governance

Within Goldman Sachs Asset Management, many of our investment personnel conducting sustainable investment research, focusing on ESG factors in portfolio construction, and driving our stewardship and engagement efforts sit within each of our investment teams. We devote considerable resources to sustainable and impact investing and have over 200 professionals who spend the majority of their time on sustainability related research, portfolio management, stewardship, engineering, and/or risk management.

The Sustainability and Impact Client Solutions team is a dedicated resource within Asset and Wealth Management that mobilizes the full range of insights, advisory services, and investment solutions across our client segments.

In Public Markets Investing, sustainable investment professionals are supported by the centralised Sustainable Investing Platform (SIP). There is emphasis on enhancing and setting the direction for sustainability through sustainability research and regulatory expertise. SIP develops sustainable investing data, methodologies, and internal education; provides sustainable investing strategic advice and analytics to Public Markets Investing teams and clients; and enhances ESG integration (inclusive of climate) within certain investment strategies. Additionally, Public Markets Investing has appointed ESG SI Heads who are embedded within its investment teams: Equities, Fixed Income, and Multi-Asset Solutions.

In Private Markets (GS Alternatives), the GS Alternatives Sustainability & Impact (“S&I”) team is led by the Chief Sustainability Officer for Private Markets Investing and is focused on institutionalizing ESG practices across GS Alternatives, as and where relevant, enhancing data collection and monitoring, implementing, and reporting on new regulatory requirements and codes, and communicating with GS Alternatives about updates in the sustainable finance space, where applicable. This includes conducting training, designing, and implementing ESG governance frameworks, analyzing ESG data and developing strategic initiatives as applicable. The S&I team assesses upcoming and developing ESG regulatory and industry standards, leveraging guidance from internal resources as well as external conferences, counsel or advisors and implement improvements to our ESG processes, as necessary. The S&I team partners closely with investing professionals (across Sustainable Investing Group, Private Equity, Infrastructure, Growth Equity, Real Estate and Private Credit), Alternatives Capital Formation (“ACF”), Fund & Information Management Group, Legal, Compliance and Operational Risk Environmental Group, among others, to design, implement, deliver, enhance, and monitor the ESG program, as relevant, for GS Alternatives.

Goldman Sachs Asset Management’s External Investing Group (“XIG”) has meaningfully expanded its ESG and impact investing capabilities and resources in recent years. In 2015, Goldman Sachs Asset Management acquired the assets of Imprint Capital Advisors LLC, a dedicated ESG and impact investing investment advisor with over 17 years of experience creating, building, and managing ESG and impact portfolios. Today, as part of XIG’s open architecture platform, the XIG Imprint team is dedicated to identifying, researching, and selecting leading third-party impact investment managers across asset classes and impact themes, both in private and public markets. The XIG Imprint team now manages over $9bn in client assets across public and private markets and serves as a valuable resource for the broader XIG platform to further strengthen its ESG and impact capabilities across asset classes.

In addition to our efforts within Goldman Sachs Asset Management, within the Executive Office, our Sustainable Finance Group (SFG) serves as the centralized group that drives climate strategy and sustainability efforts across Goldman Sachs. This includes commercial efforts alongside the firm’s businesses — all with the goal of advancing the success of our clients and promoting sustainable, inclusive growth and advancing the climate transition.

Affiliations / Memberships

Goldman Sachs and Goldman Sachs Asset Management seek to promote best practices in ESG and stewardship through various memberships and affiliations. Below, find a select list of our affiliations/memberships:

Goldman Sachs:

1. Taskforce on Climate-Related Financial Disclosures (TCFD) – Goldman Sachs has been a supporter of the TCFD since 2018 and published its first report in 2019.
2. OS-Climate – In 2021, Goldman Sachs joined as the founding US bank of OS-Climate, a cross-industry coalition and open-source platform for climate data and analytical tools that will be critical for clients to achieve their net zero ambitions.
3. CDP – Goldman Sachs has been a signatory to the CDP climate change survey since 2006 and has made our climate change-related disclosures publicly available since 2010. In 2021, to facilitate dialogue with our vendors around their own emissions management programs, we joined CDP Supply Chain as a lead member.
4. The Climate Group (RE100, EV100, EP100) – As part of our commitment to advancing renewable energy markets, we were the first US corporate to sign onto all three of The Climate Group’s RE100, EV100 and EP100 programs. Goldman Sachs Group joined RE100 in 2015, and EV100 and EP100 in 2019. These initiatives are focused on, respectively: 100% procurement of electricity from renewables; electric transport; and energy productivity. Additionally, we set a firmwide target of sourcing 100% renewable electricity, which we achieved in 2020.

Goldman Sachs Asset Management:

1. PRI – Goldman Sachs Asset Management has been a signatory to the United Nations Principles of Responsible Investment (UNPRI) since 2011.
2. Climate Bonds Initiative – Goldman Sachs Asset Management became a Climate Bonds Initiative Partner in 2015.
3. One Planet Sovereign Wealth Fund Framework – Goldman Sachs Asset Management became a member of the Asset Manager Working group within the One Planet Sovereign Wealth Fund Framework in 2018.
4. International Capital Market Association (ICMA) – Goldman Sachs Asset Management joined ICMA’s Green, Social & Sustainability Bond Committees in 2019.
5. Institutional Investors Group on Climate Change (IIGCC) – Goldman Sachs Asset Management has been a member of the IIGCC since 2019.
6. Sustainability Accounting Standards Board (SASB) – Goldman Sachs Asset Management has been a member of SASB since 2018.
7. Japan Stewardship Code – Goldman Sachs Asset Management has been a signatory since 2014.
8. Singapore Stewardship Principles – Goldman Sachs Asset Management has been a supporter of the Singapore Stewardship Principles since 2016.
9. 30% Club Japan – Goldman Sachs Asset Management became a member of the 30% Club’s Japan Investors Group in February 2020.
10. UK Stewardship Code – Signatory to the 2020 UK Stewardship Code since 2022 and were previously a signatory to the 2012 code.
11. Asia Corporate Governance Association (ACGA) – Goldman Sachs Asset Management joined the ACGA in 2022 and is a member of the China Working Group.
12. Council of Institutional Investors – We have been a member since 2017 and hold a seat on their Corporate Governance Advisory Council
13. ESG Disclosure Study Group – We became a founding member of the EDSG in June 2020. EDSG is a Japan-based organization focused on carrying out research related to ESG information disclosure best practices to enhance corporate value and growth as well as the sustainable development of society.
14. International Corporate Governance Network (ICGN) – We became a member of the ICGN in January 2020. Established in 1995 as an investor-led organization, the ICGN’s mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide.
15. Japan Stewardship Initiative – We are part of the steering committee.
16. EDCI: Goldman Sachs Asset Management signed onto the Institutional Limited Partners Association (ILPA) ESG Data Convergence Project in 2021, which convenes leading GPs and LPs in an effort to standardize ESG data collection in the private equity sector.
17. GRESB: Goldman Sachs Asset Management have been participating members of GRESB since 2023.
18. PRI Nature Reference Group: Goldman Sachs Asset Management became a member of the reference group in 2024.
19. Impact Capital Managers (ICM) – Goldman Sachs Asset Management joined the ICM membership association as of 2024.
20. Global Impact Investing Network (GIIN) – Goldman Sachs Asset Management became a member as of August 2024.

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

This portfolio seeks long-term capital appreciation by identifying alpha opportunities in high-quality, sustainable companies with improving ESG characteristics. Its investment approach centres on sustainable business models. This includes companies offering sustainable solutions to societal and environmental challenges like energy transition and healthcare, while minimizing harm to stakeholders. It also focuses on those demonstrating sustainable behaviours, which reduce risks such as regulatory headwinds or loss of client preference, preventing ESG controversies and fostering positive ESG momentum. Finally, the portfolio targets companies with a sustainable competitive position, often termed an "economic moat," allowing for long-term economic profit creation and internally financed growth.

There is no guarantee that objectives will be met.

SDR Labelling:

Not eligible to use label (out of scope)