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- But a lot of the world’s biggest banks are all talking about climate change, and say this is the year investors are most aware.
- Markets Insider spoke to Goldman Sachs, UBS and JPMorgan to see why they have been investing in climate change and why investors and clients say it’s at the top of their minds.
- View Markets Insider’s homepage for more stories.
In July, Goldman Sachs formed a Sustainable Finance Group, a much-hailed project that CEO David Solomon in a letter called a “significant, long-term” priority that is increasingly a “strategic growth opportunity and competitive necessity for our firm and our clients.”
Goldman and other banks have for years been researching and investing the topic, which has morphed into projects and financing that is now known as ESG – or environmental, social, and corporate governance.
This year has been critical.
“Now, more and more often, clients are coming to us for advice on how to tackle climate change,” John Goldstein head of Goldman’s Sustainable Finance Group, said in an interview with Markets Insider. “At the end of the day, people want to make money. And, say – take a pension fund, people need to get their money in 20 or 30 years, climate change poses a question of, will people get that money then? And how will the fund be affected?”
Goldman last month released a 34-page report, which analyzed the impact of climate change on cities. The results were terrifying. Read more about it here.
Goldstein said clients want to be able to plan for changes that will arise due to climate change, whether it be physical changes, market moves, or policy, and added that more often clients are coming to Goldman for expertise on how to manage the risks associated with climate change.
“It’s why we’ve put in a lot of time and money into research on ESG, as we don’t want to approach it with an ad-hoc fashion,” Goldstein said. “This something we need to plan for in terms of managing risk, or driving growth, or is it something we can use to drive resilience across a portfolio.”
The Goldman exec added: “We see this as an opportunity to unlock economic growth.”
And it’s not just Goldman Sachs.
“Climate change is affecting everyone and everything, so it would be unexpected not to find such effects in markets and business models,” a UBS spokesman told Markets Insider.
“Markets are often driven by human behaviour.” As a result, cultural milestones such as activist protests in the last year, including those by the Extinction Rebellion, as well as 2019 climate documentaries by David Attenborough ,are “important in making it more likely that the issues of climate change and inequality will affect markets.”
JPMorgan agreed that this year was a critical one for investors when it comes to ESG, as it released an investing note in May, titled “Climate changes everything”:
“2018, 2019 will be remembered as watershed years for climate change awareness,” a note released by the bank in May said. “Weather- and environment-related events have convinced the public and policymakers that global warming is not a risk, but a reality.”
In the note, it highlighted that “sustainable investing does not have to sacrifice returns, and may be of growing importance.”
UBS backed this up by crunching the numbers on the economic impact of a heating globe, something that its spokesperson was keen to highlight it has been researching for a decade.
From a note in April, researchers found that if the temperature increased by just 4 degrees Fahrenheit, US GDP would drop 2%. If it went up 8 degrees, then 4% would be lost.