Currently, the bank does not adequately assess the public health impacts of its energy and power sector financing, which puts it at risk of both financial and reputational damage, writes Dan Chu, of the Sierra Club Foundation.
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Goldman Sachs, a financial powerhouse, touts its values of partnership, client service, integrity and excellence. Yet, these values are at odds with the reality of its business practices. Its ongoing funding of fossil fuels not only jeopardizes our collective well-being but also poses a significant financial risk to its shareholders, undermining every stated value from partnership to integrity.
As it stands, Goldman Sachs is one of the most prominent financiers of fossil fuels, pouring more than a hundred billion dollars of funding into energy firms that its CEO, David Solomon, calls "hugely important" to the bank.
Last month, during the Goldman Sachs annual meeting of shareholders, the Sierra Club Foundation presented ashareholder resolution urging the bank to conduct a rigorous assessment of the material risks and opportunities linked to its financing activities. Specifically, it addressed how these activities could exacerbate or alleviate pollution disparities. Although it didn't pass, it received a 10% approval rate that signifies a meaningful shift among investors toward environmental justice, representing over $10 billion in shareholder value.
At this time, more transparency, not less, is needed. Without it, Goldman Sachs will continue having a major blind spot in its energy financing. Currently, the bank does not adequately assess the public health impacts of its energy and power sector financing, which puts it at risk of both financial and reputational damage.
Earlier this year, a significant example of these risks materialized. After years of advocacy, communities achieved a crucial victory when President Biden announced a temporaryfederal pause on permitting liquefied natural gas, or LNG, export facilities, many of which Goldman Sachs finances. This pause allows for a much-needed assessment of the potential consumer energy cost increases and negativehealth risks facing communities closest to LNG export facilities. During this pause, the billions that Goldman Sachs has invested in LNG projects are stranded assets, exposing the bank and its shareholders to harm that might have been avoided with a more comprehensive risk assessment.
As executive director of the Sierra Club Foundation, which holds shares of Goldman Sachs, I am not just an observer of these issues. I am also responsible for seeing this addressed. I see firsthand how energy projects threaten the company's performance. The choice between protecting our planet and making profits is false, especially when companies face growing business risks tied to extractive companies, including regulation, litigation and community resistance, as pointed out in arecent report.
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The bank's continued funding of fossil fuels starkly contrasts with what Goldman Sachs publicly states. So much so that in 2022, the Securities and Exchange Commission assessed Goldman Sachs Asset Management a$4 million penalty for failing to follow its own practices and disclosures related to its sustainability claims.
The potential dissonance between the banks' stated goals and actual practices goes much deeper. In the past, Goldman Sachs has made various commitments toreducing racial disparities andupholding human rights. However, these commitments directly contradict its ongoing support for fossil fuel projects, which have been consistently linked toracial injustice and human rightsrisks.
At the same time, Goldman Sachs has committed to doing great work to improve the world. For example, the One Million Black Women Initiative, or OMBWI, has worked to address the biases Black women face in our society by making billions of investments in health care, housing and education. Yet these good deeds alone aren't enough to overcome the multibillion-dollar contradiction that lies at the heart of its affairs. Where Goldman Sachs invests its considerable capital reflects its values, and day by day, they are being compromised.
Now is the time for Goldman Sachs to make such community investments core to its company rather than investing in community-destroying projects that create pollution, intensify the climate crisis and threaten its own bottom line and shareholder value. It's also the time that its OMBWI commitment isn't undermined by negative outcomes associated with its fossil fuels financing, outcomes thatdisproportionately affect Black women andBlack Americans broadly.
Ultimately, Goldman Sachs cannot protect shareholders' interests while ignoring how financing fossil fuel projects impacts its reputation, bottom line and public health. Only by meaningfully addressing these risks can the company create a sustainable business model, a thriving future for all and truly live up to its self-professed values of partnership, client service, integrity and excellence.
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