Goldman picks stocks poised to benefit from the multitrillion-dollar ESG opportunity ahead

Published Wed, Jun 29 202210:14 AM EDTUpdated Wed, Jun 29 20222:55 PM EDT

Goldman Sachs said sustainability-focused investing is transforming from aspiration to action and outlined a host of under-the-radar ways for investors to capitalize on the push toward a greener economy. The firm's call follows meetings with investors across Europe and the U.S. Analysts led by Brian Singer noted a desire among sustainable fund managers to expand the investable universe of stocks, while also more closely defining sustainable objectives. The desire for clarity follows heightened scrutiny — including from the SEC — around whether sustainable funds are actually following through on their stated goals. "As we head into the second half, we continue to see a reevaluation of Sustainability investing strategies which we believe will result in greater focus and transparency of fund objectives over time and a greater focus on impact," the firm wrote Monday in a note to clients. Part of this shift is also thanks to broader trends in the market. The recent outperformance in value stocks has led investors to reconsider these strategies. Additionally, highly concentrated positions in the final stages of clean energy supply chains — in solar and wind energy, for example — has led to crowded trades. With this in mind, Goldman categorized the investable universe into six sections, with accompanying stock picks. Green capex reinvestors/revenue beneficiaries/greenablers Energy efficiency Clean reliable energy Circular economy ESG improvers Food security 'Green capex' reinvestors Goldman said that green capex will be the "multi-year secular theme driving the next wave of infrastructure as focus rises to decarbonize the world." All told, the firm said that capital spending toward net zero infrastructure needs to hit $6 trillion annually this decade, compared with the $3.2 trillion spent annually between 2016 and 2020. "Incremental Green Capex will be needed from a combination of governments, private companies and public companies, and will involve, in our view, an all-in approach across multiple sectors that will be critical or needed on path to Net Zero, Infrastructure and Clean Water goals," Goldman said. The firm said it sees "significant discovery value" earlier in the green energy supply chain, especially within the industrials sector. Energy efficiency Commodity prices are rising, which will ultimately fuel a shift to cleaner technologies, Goldman said. "We see the opportunity for greater recognition among ESG investors of companies whose products/services can enable greater energy savings or lower energy consumption,&qu