Markets

Goldman Sachs to spend $750 billion on climate transition projects and curb fossil fuel lending

Key Points
  • Goldman Sachs said it's planning to spend $750 billion on sustainable finance-related projects over the next decade.
  • The firm also said that it will restrict financing to all new oil production and exploration projects in the Arctic, and that it would impose stricter lending requirements for coal companies.
  • "There is not only an urgent need to act, but also a powerful business and investing case to do so," Goldman Sachs CEO David Solomon wrote in an opinion piece published Sunday in the Financial Times.

Goldman Sachs is overhauling its environmental policies, which includes pledging to spend $750 billion on sustainable finance projects over the next decade, as well as implementing stricter lending policies for fossil fuel companies, the company said over the weekend.

The $750 billion will focus on financing, investing and advisory activity related to nine key themes within climate transition and inclusive growth finance, which includes things like sustainable transport, accessible and affordable education and food production.

"There is not only an urgent need to act, but also a powerful business and investing case to do so," Goldman Sachs CEO David Solomon wrote in an opinion piece published Sunday in the Financial Times. "Focusing on these specific goals gives us a set of metrics — such as the amount of carbon reduction and the number of people served — that we can track over time both for the companies and for ourselves," he added.

Solomon said that companies no longer have the "luxury" of treating climate-related initiatives as a "peripheral issue," and that financial institutions must support those driving change.

David Solomon, Goldman Sachs
Adam Galica | CNBC

Over the weekend, the bank also released updates to its environmental policy framework — part of its sustainable finance initiative — which includes stricter fossil fuel-related lending policies.

Goldman said that going forward, it will not finance any project that "directly supports new upstream Arctic oil exploration or development," or any new coal-fired power generation project unless it also includes carbon capture or other emission cutting technologies. The firm's prior policy only restricted funding in developed nations. The bank also said it won't back new thermal coal mine developments.

The bank said that it will work with mining companies to help them diversify and cut emissions, and that a company's progress on these fronts will be a "key consideration" when evaluating future financing. The firm said it would phase out financing for thermal coal mining companies that do not have transition plans in place.

A joint statement from the Sierra Club and Rainforest Action Network said that the bank's "fossil finance policy is now the strongest among the big six U.S. banks," but noted that it still lags those of other major global banks.

Despite these initiatives, Solomon made it clear that the firm has no intention of pulling back from the fossil fuel industry more broadly.

"The world will continue to produce and use fossil-based fuels, aeroplanes, cars and industrial goods, and Goldman Sachs will continue to support clients in transactions that are important to economic activity," he wrote.

Goldman's announcement comes as the annual UN climate change conference drew to a close in Madrid. Talks ended with little progress, which UN secretary general António Guterres said was a "lost" opportunity.

Solomon said that the public and private sectors need to work together to make progress on climate change, and that he would be in favor of a carbon tax to accelerate companies' response.

"To give us the best chance of combating climate change, governments must put a price on the cost of carbon, whether through a cap and trade system, a carbon tax or other means. The resulting incentives will channel capital to low carbon solutions and drive innovation. Combining public policy, technology and capital is a must, not a choice," he wrote.