Goldman Sachs Leads Investment Banks on Environmental Commitments
A Step Forward in Investment Banking
Friends of the Earth today welcomed Goldman Sach’s commitment to establish the investment banking community’s most detailed environmental financing policies thus far. Goldman Sach’s new policy includes a commitment to assess environmental and social issues in equity analysis, to establish a Center for Environmental Markets, and to integrate forest and indigenous peoples policies into business selection decisions. The bank has also pledged to green its own internal operations, reduce greenhouse gas emissions from its own power plants, and to make up to $1 billion available to renewable energy investments. << See policy here—PDF file>>
The detailed nature of its new environmental policy puts Goldman Sachs ahead of other investment banks such as Merrill Lynch and Morgan Stanley. For example, Morgan Stanley established a general environmental policy statement in 2002, but has not advanced in its understanding how to apply environmental analysis or standards on the transaction level.
“Over the past several years, the banking industry has made significant progress in integrating environmental issues into lending, but not underwriting,” said Michelle Chan-Fishel of Friends of the Earth. “We hope that Goldman Sachs will successfully implement and build upon its policy, and break new ground in the arena of finance and sustainability.”
Background: Underwriting Under Fire
Since 1995, when Friends of the Earth began pressuring institutions such as Merrill Lynch and Morgan Stanley on their financial links to the notorious Three Gorges dam in China, concerned citizens have challenged US investment banks on the environmental impacts of their financing activities. In particular, Goldman Sachs and other investment banks were criticized for helping Three Gorges dam lenders, such as China Development Bank and China Construction Bank, issue bonds on the international markets.
In 1999-2000, activists also waged a campaign against Goldman Sachs for underwriting the initial public offering of PetroChina, a company that intended to lay off 1 million workers and that had operational links to repressive regimes in Sudan and Tibet. The campaign drastically reduced investor appetite for the issue, and caused a 3 month delay of the IPO due to immense social controversy.
“We will increasingly see Chinese financiers and companies coming to the US capital markets, raising continued environmental and human rights issues for underwriters and investors,” said Michelle Chan-Fishel. “We hope that Goldman Sachs will be able to use its new commitments and expertise on business selection and risk management to effectively address these issues.”
About Friends of the Earth
Friends of the Earth is the U.S. voice of an influential, international network of grassroots groups in 70 countries. FOE is the founder of BankTrack, an international network of advocacy NGOs focusing on reforming the private financial sector.