Sustainable, Responsible &/or ESG Policy:

We focus our investments[1] in companies which are aligned to five key impact themes which, in our view, are collectively driving environmental sustainability. The themes we are focused on are

• clean energy,
• resource efficiency,
• sustainable consumption,
• the circular economy, and
• water sustainability.

As part of this approach, we are

• determining the company’s alignment to our thematic framework,
• assessing the company’s impact on the environment, and
• forming a partnership between the company and us to promote change.

• Thematic Alignment

When constructing the portfolio, we aim to focus on companies that demonstrate a direct and meaningful link to the five key impact themes we are targeting: clean energy, resource efficiency, sustainable consumption, the circular economy and water sustainability. Each of these themes can be further broken down into sub-themes, which ensure that we are accessing the company universe holistically and we are not missing out on investment opportunities in certain segments. Please refer to the previous section for the detailed break-down of our thematic framework.

As it relates to examining the ‘thematic purity’ of companies in our investment universe and portfolio, our team takes a variety of metrics into consideration. While revenues are in many cases the easiest and most tangible approach to establish thematic alignment, it remains a backward-looking metric which runs risk to overlook certain pockets of the market. For instance, we invest in a few businesses which are in the process of transforming their operations and build-out new technologies that may have, in our view, a meaningfully positive impact on the environment once at scale. However, while this is often the dominant driver of the company’s future growth potential, today’s revenue share might still be skewed to their legacy operations. If we have conviction that the company is committed to progressing in their transformation, we are comfortable to invest and ensure our portfolio is exposed to innovation that is exciting from an impact and return perspective.

It is fair to say that this makes the measurement of thematic alignment, or environmental impact, somewhat more challenging, but we seek to stay broad in the metrics we consider to ensure we are not creating an unnecessarily restrictive universe which could have negative implications from an impact and alpha optimization standpoint. As a result, while revenues are relevant for a number of our portfolio holdings, e.g. established utilities who have made major progress in advancing their renewable business over the last decade, we also consider factors such as capital expenditures, future earnings growth estimates, operating profits and corporate strategy to assess a company’s thematic purity.

• Impact Measurement[2]

One of the primary objectives of the Goldman Sachs Global Environmental Impact Equity Portfolio is to generate meaningful and measurable impact for our clients. In this context, we aim to identify the best candidates for the portfolio, in terms of their alignment with our five key investment areas, and their potential for having a positive impact on the environment over the long-term.

The ability to make an impact starts with the investment process.  We seek to:

• Identify impactful businesses that are aligned with at least one of the five key themes to create an investment universe of environmental solution providers.
• Assess the impact of companies that are part of our final portfolio over time with quantitative metrics and report meaningful data.
• Engage with management teams to expand a company’s impact footprint, while monitoring progress and targets.

Our approach to measuring impact at the company and Portfolio level is focused on understanding how the companies are helping to drive greater environmental sustainability across our key investment areas: clean energy, resource efficiency, sustainable consumption, the circular economy, and water sustainability. The corresponding primary key performance indicators (KPIs) we have sought to measure at the aggregate portfolio level are:

• Tons of CO2 avoided/saved (net)
• Liters of water saved/treated
• Tons of waste reduced
• Tons of material recycled/treated
• Installed renewable energy capacity

• Deep Dive: ESG Analysis[3][4]

It is important to emphasize that the alignment to our key impact themes is a prerequisite for a company to be included in our investment universe. This is separate to our ESG integration efforts which are ingrained in our stock due diligence, i.e. strong ESG practice becomes crucial when considering the inclusion of a company from our investment universe into our final portfolio. As a result, being a good corporate citizen and employing high environmental standards as part of one’s operations does not alone qualify a company to be in scope for this investment solution. For instance, while we welcome broad based efforts of companies across many industries, most notably big tech, to go carbon neutral, we do not equate such efforts with offering a solution to the key environmental issues we are targeting. In this example, we would be most interested in those companies that offer products and services that ultimately allow their clients to achieve their ambitious carbon reduction targets.

As indicated above, ESG integration forms part of our investment process. Driven by our philosophy of investing in high quality businesses over the long-term, we integrate material ESG factors throughout our investment process, where relevant. Our ESG assessment is analyst-led and is part of our 1) stock-level due diligence, 2) risk management[5] and portfolio construction as well as 3) active ownership and stewardship efforts.

As it relates to our bottom-up company research, all research analysts can leverage our online investment platform, ‘Concert’. Concert allows our investment professionals to assess ESG factors across a large coverage universe by serving as a centralized investment research platform, which houses, among others, our ESG Dashboard. The ESG Dashboard pulls in material third party data tailored to a company’s business model and provides our investors with a first view of a company’s ESG profile. Additionally, analysts and all our investment teams across asset classes can access ESG news and research, engagement as well as proxy voting records via Concert to further enhance their views and allow for effective and coordinated corporate engagement. 

Beyond leveraging our ESG Dashboard[6], analysts have the option to dig deeper on ESG by means of our proprietary Goldman Sachs Asset Management ESG Scorecard. The Scorecard serves the purpose of going beyond third-party data as it relates to assessing the ESG profile of a company. We have found this step to be valuable, as ESG data availability and accuracy can be challenging for certain companies. Thus, even though our analysts are not obligated to complete this more comprehensive assessment of ~70 ESG KPIs for our holdings in the portfolio, we have made the experience that the tool gets broadly leveraged and our research analysts have completed their own proprietary ESG assessment for ~85% of the portfolio’s market value. 

For companies with a completed Scorecard, the assessment forms the basis for stock-level due diligence and engagement.[7] The Scorecard provides a standardized framework for conducting a baseline assessment of a company’s ESG characteristics relative to peers. Like our ESG Dashboard, the Scorecard pulls in material (defined by the SASB framework), time series data, allowing us to focus only on ESG factors that are meaningful to a firm’s growth, profitability and risk management[8] profile. However, this is merely the starting point for a more holistic assessment whereby 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 it is used to compare the company against peers, industry averages and best practices. This insight can help inform, challenge or validate the assumptions that the analyst has used in their quantitative valuation models. Additionally, the covering analyst will provide a qualitative summary of a company’s overall ESG profile and translate their assessment of the underlying ~70 ESG KPIs into a qualitative score.

Tied into the idea of enhancing our process by integrating material ESG factors into investment decisions, we conduct ongoing monitoring of ESG factors on a case-by-case basis at the stock and portfolio level. Our investment teams can pull in a company’s ESG rating into our traditional valuation tools and Goldman Sachs Asset Management’s proprietary portfolio construction and risk tools allow our PM to analyse the ESG credentials of the portfolio and simulate the impact of potential trades. We measure ESG metrics, such as carbon intensity, on an ongoing basis and ESG metrics, such as this, are included in our daily risk reports.

Once we own, our investors and the Goldman Sachs Asset Management Global Stewardship Team work together to use multiple levels of influence – proxy voting, corporate engagement, and active buying and selling – to encourage positive corporate change.

[1] 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.

[2] 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

[3] As part of our investment process, we may integrate ESG factors alongside traditional factors. The identification of a risk related to an ESG factor will not necessarily exclude a particular investment that, in our view, is otherwise suitable and attractively priced for investment, and we may invest in an issuer without integrating ESG factors or considerations into our investment process. Moreover, ESG information, whether from an external and/or internal source, is, by nature and in many instances, based on a qualitative and subjective assessment. An element of subjectivity and discretion is therefore inherent to the interpretation and use of ESG data. The relevance and weightings of specific ESG factors to or within the investment process vary across asset classes, sectors and strategies and no one factor or consideration is determinative. 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 assessments depicted here may not be performed for every portfolio holding. The process for conducting ESG assessments and implementation of ESG views in portfolios, including the format and content of such analysis and the tools and/or data used to perform such analysis, may also vary among portfolio management teams.

[4] 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

[5] The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.

[6] 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

[7] 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

[8] The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.

Process:

Our investment process can be broken down into three steps as below:[1]

Step 1: Ongoing Theme Identification & Proprietary Investment Universe

We have built an extensive and proprietary universe of stocks which are exposed to the key impact themes highlighted in the below illustration. Each stock is assigned a sub-theme and level of exposure to the theme ranging from high to low based on proprietary research.

These thematically aligned companies exist across the market capitalization, sector and regional spectrum. We rely on first-hand, fundamental research and our global presence to help us build our investment universe which today consists of ~500 names.

Step 2: Local Analyst Idea Generation & Stock Research

The research team brings forward attractive businesses with an appx. upside target of 50% over 3 years. Each analyst is responsible for rigorously analyzing companies from a financial, ESG and impact perspective.

Final stock selection is determined by the Portfolio Manager and will be the conclusion of extensive discussion and debate.

Step 3: Final Portfolio Construction

Final position sizing for holdings within the portfolio are determined by the Portfolio Manager who takes into consideration the following factors:

• The exposure of the company to the environmental impact theme
• Maximize upside potential[2] while prudently managing risk[3]
• Avoid unintended risks

In general, the higher the exposure to the environmental impact theme effect, the higher the potential returns and the lower the volatility of the shares, the larger the position size is likely to be in the portfolio.

The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.

For further details on our ESG process for the fund, please refer to the question immediately above.

Internal and External sources of data:

We use proprietary ESG research as well as leverage external research providers. The vast majority of our ESG research is internally generated and investor led. As a result, all of our investors conduct ESG research and engagement, which is naturally embedded into our fundamental research process, informs our models and is part of every decision we make at the company level.

Our Credit analysts and sovereign economists consider material and relevant ESG factors and risks that can affect the credit quality of the issuer; they incorporate these into their overall research and issuer valuations. In performing this internal analysis, our dedicated corporate analysts and sovereign economists may leverage MSCI platform and/or Bloomberg – third party vendors, to assist our ESG analysis; the MSCI platform provides in-depth research, ratings and analysis of the ESG-related business practices across a number of developed and emerging markets. We may also engage additional data providers such as Sustainalytics, CDP and TruCost to assist our ESG analysis. Additionally, we may use a third party vendor, ETHIX SRI Advisors, to source the listings of entities engaged in in financing/ manufacturing cluster munitions. Furthermore, in our effort to maintain a high level of risk management to help ensure that we stay within the portfolio’s investment and regulatory guidelines, we also utilize Sentinel which is a Fidessa product, a pre- and post-trade compliance monitoring tool which provides managers with the necessary tools to adhere to client guidelines and portfolio constraints.

The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.

We continually review our external providers to remain abreast with the latest technology and services that complement our process and investment philosophy.

[1] As part of our investment process, we may integrate ESG factors alongside traditional factors. The identification of a risk related to an ESG factor will not necessarily exclude a particular investment that, in our view, is otherwise suitable and attractively priced for investment, and we may invest in an issuer without integrating ESG factors or considerations into our investment process. Moreover, ESG information, whether from an external and/or internal source, is, by nature and in many instances, based on a qualitative and subjective assessment. An element of subjectivity and discretion is therefore inherent to the interpretation and use of ESG data. The relevance and weightings of specific ESG factors to or within the investment process vary across asset classes, sectors and strategies and no one factor or consideration is determinative. 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 assessments depicted here may not be performed for every portfolio holding. The process for conducting ESG assessments and implementation of ESG views in portfolios, including the format and content of such analysis and the tools and/or data used to perform such analysis, may also vary among portfolio management teams.

[2] Complete information on the risks of investing in the Fund are set out in the Fund’s prospectus.

[3] Your capital is at risk and you may lose some or all of the capital you invest.

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…

The fund seeks to invest in companies that have a net positive impact on the environment via their products and/or services which are aligned to five key impact themes. Therefore, our team does not only take into account the carbon emissions which are a direct result of a company’s production process and internal energy consumption but are also focused on the entire value chain and product life cycle. To note, all holdings in the portfolio derive their revenues from products/ services that contribute to environmental sustainability. While some of these are pure plays, some are transitioning to renewable space.

SDR Labelling:

Not eligible to use label