Sector Guidelines

We equip business teams with environmental and social due diligence guidelines for fourteen key sectors, as well as guidelines for certain cross-sector issues. These are outlined below.

Our Environmental Policy Framework contains the guidelines and approach we take for sectors with heightened environmental or social sensitivity and our cross-sector guidelines.

General Industries

  • Chemicals

    Manufactured chemicals are ubiquitous in society, appearing in everything from cosmetics to medical devices to electronics to advanced manufacturing processes. Despite groundbreaking advances, environmental and health impacts of substances that have been in widespread use for decades have continued to emerge. Increasing levels of certain chemicals have been observed in humans and wildlife around the globe with consequences ranging from cancer to the mutation of reproductive systems. The risks are heightened for agricultural chemicals such as pesticides and fertilizers and for certain industrial chemicals such as fire retardants or hazardous materials such as asbestos. In addition, certain chemicals are particularly corrosive, toxic or explosive, and accidental leaks and explosions have resulted in the pollution of drinking water systems, public health hazards and fatalities. The production of chemicals is also very energy intensive and facilities often have captive power plants that supply energy using fossil fuels as feedstock.

    Accordingly, for transactions where the use of proceeds is related to new production, transport or storage of chemicals, we will conduct an enhanced due diligence review of the type of chemical and potential risks and the company’s environmental, health and safety track record. In addition to standard due diligence items, we will examine whether the company’s production process requires the use, handling, transport, storage or disposal of hazardous chemical materials. We will also consider the company’s policies and procedures in place to prevent exposure to hazardous chemicals in addition to emergency preparedness and response plans in the event of significant fire, explosion or spills. We will review the company’s impact on resources, including energy and water. In addition, we will consider whether the company’s production process generates significant air emissions (e.g. sulfur dioxide, nitrogen oxide, PM10, volatile organic compounds, etc.) or emissions with significant cumulative impacts on local air quality.

  • Infrastructure & Transportation

    Infrastructure development and economic growth are closely linked, with improved transportation infrastructure facilitating the expansion of international and regional trade and efficient mobility as well as providing significant employment opportunities in the construction and operation of projects. There are many benefits associated with public transit projects which bring greater efficiency and can reduce greenhouse gas emissions that result from the combustion of fossil fuels such as petroleum based products. However, the development of infrastructure projects, and in particular transportation projects that traverse significant distances or cross through residential / urban areas or sensitive ecosystems, may have significant and often irreversible environmental and social impacts. Impacts may include the disturbance and physical alteration of land and sensitive biodiversity, resettlement of communities, and the potential to spur local conflict over legal rights to land. As such, as part of our due diligence process we consider the environmental and social impacts of infrastructure projects and transportation-related transactions including the development and expansion of roads and railways, ports, harbors and airports.

    Additionally, as specified in our Environmental Policy Framework, for transactions where there could be material effects on local communities, we will examine whether our clients have demonstrated an appropriate stakeholder engagement process. In cases where there is large-scale resettlement, we will closely evaluate the stakeholder engagement process and, if appropriate, work with the client to improve aspects such as compensation measures and/or community engagement.

  • Water

    There is growing focus on addressing the global crisis caused by insufficient water supply to satisfy basic human needs and the increasing demands on the world’s water resources to meet residential, commercial and agricultural needs. The rapidly increasing demand for agriculture, coupled with rising industrial activity, climate change, population growth and urbanization is creating potential for significant transboundary conflict over freshwater resources; in addition, the construction of new water and wastewater infrastructure projects can create other environmental and social concerns. In developed markets, aging water and wastewater infrastructure can pose significant challenges to sustainable growth efforts.

    For new water and wastewater infrastructure projects, we expect companies to have conducted a comprehensive environmental and social impact assessment, address potential governance concerns and conflicts on a regional or international level and have a commitment to mitigate material impacts to those who may be adversely affected. We will also consider companies’ plans to mitigate ecological and social sensitivities if water and wastewater treatment projects potentially impact fisheries, water flow and quality due to issues such as improper sewage discharge or reduced access to water resulting from diverted uses. 

    Additionally, as specified in our Environmental Policy Framework, for transactions where there could be material effects on local communities, we will examine whether our clients have demonstrated an appropriate stakeholder engagement process. In cases where there is large-scale resettlement, we will closely evaluate the stakeholder engagement process and, if appropriate, work with the client to improve aspects such as compensation measures and/or community engagement.

Agriculture / Soft Commodities

  • Forestry*

    Forests are critical for the environment and biodiversity and provide livelihoods for many. Deforestation and degradation of forests remains a significant challenge in many regions, and is a major contributor to greenhouse gas emissions.

    For forestry transactions (including logging and primary processing of forest products), we will not knowingly finance companies or projects that collude with or are engaged in illegal logging or utilize illegal or uncontrolled fire.

    As part of our enhanced due diligence, we examine whether clients that process, purchase, or trade wood products from particularly high risk countries have certifiable systems in place to ensure that the wood they process, purchase or trade comes from legal sources. This includes understanding clients’ supply chain monitoring systems and chain of custody certification.

    We require clients to obtain or be working towards Forest Stewardship Council or a comparable certification when we finance forestry projects that impact high conservation value forests in order to ensure that crucial forest ecosystems are preserved appropriately. For operations that are not already certified, we will introduce or refer our clients to credible experts who can help establish a rigorous, time-bound, step-wise commitment to achieve certification within three years.

  • Palm Oil*

    Palm oil has become the largest source of edible oil globally and is the base for a vast number of household products. At the same time, growing demand for palm oil has placed pressure on crucial ecosystems. We apply enhanced due diligence to transactions relating to palm oil companies.

    We will not knowingly finance companies or projects that collude with or are engaged in illegal logging or utilize illegal or uncontrolled fire. We require clients’ compliance with all legal requirements, including in the case of Indonesia, the Indonesian Sustainable Palm Oil (ISPO) system.

    We also require clients to obtain Roundtable on Sustainable Palm Oil (RSPO) or a comparable certification. For operations that are not already certified, we will introduce or refer our clients to credible experts who can help establish a rigorous, time-bound, step-wise commitment to achieve certification within three years.

    Furthermore, we require clients to have a commitment to no net deforestation, no peatland development and no human rights violations. Where this is not in place, we will introduce or refer clients to credible experts who can help establish such a commitment. Clients should have a plan in place to demonstrate compliance with this commitment.

     

  • Biofuels

    Biofuels, which are fuels derived from renewable biological materials including ethanol from sugar cane, sugar beet, corn and other plant-based fuels such as soya, canola and jatropha, are the base for a vast number of household and industrial products. When harnessed appropriately, biofuels can help address our dependence on fossil based feedstock and fuels. At the same time, growing demand for the agricultural feedstocks that produce biofuels has placed pressure on crucial ecosystems. Additionally, with increased demand for biofuels, there has been concern of competition with and price impacts on food staples such as corn.

    Accordingly, we consider the environmental and social impacts associated with biofuel production during the course of a transaction, including the type of feedstock. We also consider forest and natural habitat conversion and impacts to High Conservation Value Forests; illegal logging; illegal and uncontrolled fire; impacts to communities and indigenous peoples; unacceptable labor practices which disregard international regulations; and lifecycle greenhouse gas emissions of a biofuels project.

Metals & Mining

  • Mining, Coal & MTR*

    Mining is an important industry in the global economy, occupying a primary position at the start of the resource supply chain. However, we recognize that mining has the potential to cause irreversible environmental and social impacts. Some projects are inherently higher-risk because they are located in areas of ecological or social sensitivity, such as the rainforest or areas with indigenous peoples. Project development may result in the physical and/or economic displacement of people, and increased access by third parties to previously remote areas may create additional environmental and social impacts. The extraction and processing of certain metals may also involve the use of hazardous chemicals such as cyanide which have the potential to present safety issues for workers and the local population. Certain metals such as rare earths and copper also may release naturally occurring radioactive particles during mining and can present processing and transport issues.

    For financing transactions which directly pertain to the development of new mine resources, we will conduct enhanced due diligence including reviewing the company’s compliance with all local laws and permitting, environmental and social impact assessment and management plan, use of freshwater resources and community impacts. In addition, we will review compliance with our policies relating to Indigenous Peoples, Protected Areas and World Heritage Sites, and Human Rights as detailed in our Environmental Policy Framework. Where appropriate, we will encourage our clients to follow best practice guidelines such as the principles developed by the International Council on Mining and Metals (ICMM).

    Coal and MTR

    Coal mining involves a number of extraction methods, at both the surface and underground level. Mountaintop removal (MTR), a form of surface mining used in the Appalachian region of the United States, has particularly significant impacts on ecosystems, water quality and local communities.

    For transactions involving coal mining globally, we apply enhanced due diligence, including consideration of the following factors: companies’ environmental, health and safety (EHS) track records; siting and ecological impacts; regulatory compliance and ability to meet international practices where local regulation is lagging; litigation, violations, and citations; remediation methods; impact on water quality; and local community and human rights issues. For financings directly supporting new coal mine development, we will be selective in the transactions we undertake and where the sensitivities are too high, we will forgo the opportunity.

    For financings where the specified use of proceeds would be directed towards mountaintop removal mining, we will decline participation. For other financings involving U.S. coal companies that have production from MTR mining, we will decline participation unless the company has demonstrated that there will be an absolute and permanent reduction in its MTR coal production over a reasonable timeframe. 
     

Oil & Gas

  • Conventional Oil & Gas

    Oil and gas operations (upstream, midstream and downstream) present a wide range of environmental and social considerations, which we factor into our approach toward due diligence when working with our clients in the sector. Conventional exploration and development of new oil and gas assets can take place in more complex and high risk operating environments, including deep offshore waters, remote locations and countries with weaker governance structures. Where there are financings that can facilitate the development of new oil and gas reserves or related infrastructure in these types of environments, enhanced due diligence considerations include: pollution (potential for releases of petroleum, wastewater or hazardous substances), risks related to deep water drilling operations, environmental, health and safety (EHS) track record and experience of the operator, governance (including the ways in which beneficiary governments utilize oil revenues), ecological and social sensitives, and impacts on indigenous peoples.

    Where relevant, we expect clients to demonstrate compliance with our policies relating to Indigenous Peoples, Protected Areas and World Heritage Sites, and Human Rights as detailed in our Environmental Policy Framework.
     

  • Unconventional Oil & Gas*

    The rapid expansion of hydraulic fracturing has contributed to the expansion of energy resources, particularly in the U.S., along with greater affordability of energy for consumers and industry, job creation and economic growth. But it has also come with increasing concerns related to water consumption, impact on water quality, wastewater disposal methods, potential seismic impacts, air emissions (including methane), and local community impacts.

    For transactions involving new unconventional oil & gas and hydraulic fracturing, we apply enhanced due diligence. Key issues to be addressed include but are not limited to: companies’ care taken on location and site selection; well construction method, including integrity of casing and cementing; management of ongoing operations, including well flow and pressure monitoring; integrated water management, including groundwater testing, water withdrawal, wastewater management; fracking fluid usage and disclosure; air emissions management, including fugitive methane emissions and use of flaring and venting; and engagement with and mitigation of impacts on the local community.
     

  • Oil Sands*

    Oil sands, also known as tar sands or bituminous sands, are sandstone or carbonate formations containing a naturally occurring viscous form of petroleum (bitumen) with large deposits found in Canada’s Province of Alberta. In many cases, significant amounts of energy and water are necessary to extract and upgrade bitumen, and there is a potential for impacts on boreal forests and local communities.

    For transactions relating to oil sands, we apply enhanced due diligence. Among other factors, we consider: energy use and greenhouse gas emissions; environmental impacts related to integrated water and waste management; forest and biodiversity preservation; and any local community impacts, including those relating to Canada’s First Nations people.

Power Generation

  • Coal Fired Power Generation*

    Coal fired power generation is one of the largest sources of air pollutants, including greenhouse gas (GHG) emissions, and has other significant environmental, health and safety impacts on local communities. However, coal fired power is currently a major source of electricity generation and a contributor to reliable and diverse energy supply globally, particularly in developing economies as a source of affordable energy.

    We will decline any financing transaction that directly supports the development of new coal fired power generation in the U.S. and other developed economies* unless it has carbon capture and storage or equivalent carbon emissions reduction technology.

    In many developing economies, access to affordable energy is necessary for economic growth and poverty alleviation and coal remains a significant source of affordable energy. For financings directly supporting the development of new coal fired power generation in these economies, we will be selective in the transactions we undertake and where the sensitivities are too high, we will forgo the opportunity. We apply enhanced due diligence for these financings and among the factors we consider are: the energy needs and affordability in the region; fair assessment of low carbon alternatives; type of technology and emissions controls, with a preference for supercritical or better power generation technology; regulatory drivers; and the company’s efforts to measure, report and reduce GHG emissions and other pollutants.

    *We define developed economies based on the FTSE Country Classification as of September 2015.

  • Gas Fired Power Generation

    Natural gas has become a growing energy resource as a result of its thermal efficiency, relative cost efficiency and environmental performance. Natural gas-fired plants emit significantly lower sulfur dioxide and nitrogen oxide emissions than coal-fired power plants, and have lower carbon dioxide emissions per unit of energy produced. Though natural gas is viewed as a relatively cleaner fuel than other fossil-based sources such as coal, it still emits carbon dioxide and may present other environmental and social issues. 

    As such, when evaluating financing opportunities for new natural gas-fired power generation, we will consider, among other factors, possible community health, safety and environmental considerations which could result from combustion, ecological and social sensitivities pertaining to development; community impacts and siting; and water used for cooling and discharge associated with natural gas boilers and combined cycle systems.

  • Hydroelectric Power

    Hydropower plays a critical role as a renewable source of energy and baseload power for many countries while also contributing to the storage of water which can be used for drinking consumption or irrigation purposes. In storing water, hydropower protects water tables against depletion and reduces vulnerability to floods and droughts. Despite these benefits, without the proper environmental and social impact assessment and mitigation measures in place, hydropower has the potential to displace people, and affect fish, plants and wildlife by changing water levels, flow patterns and water temperatures. 

    While we prefer lower impact and smaller run-of-river hydropower projects where possible, for financings which pertain to new large-scale hydropower, we will conduct enhanced due diligence including reviewing the project’s environmental and social impact assessment to understand whether the new development occurs in a responsible and sustainable manner. If appropriate, we will also refer our clients to best practice guidelines such as the International Hydropower Association (IHA)’s Sustainability Assessment Protocol. In addition, we will review compliance with our policies relating to Indigenous Peoples, Protected Areas and World Heritage Sites, and Human Rights as detailed in our Environmental Policy Framework. For certain transactions where there could be material effects on local communities, we expect our clients to demonstrate an appropriate stakeholder engagement process. In cases where there is large-scale resettlement, we will closely evaluate the stakeholder engagement process and, if appropriate, work with the company to improve aspects such as compensation measures and/or community engagement.
     

  • Nuclear

    Nuclear power generation remains divisive in parts of the world following high profile accidents such as Fukushima Daiichi, Chernobyl and Three Mile Island. However, according to the International Energy Agency (IEA), significant expansion of nuclear power is expected to continue in certain areas as a clean baseload energy alternative to fossil fuel electricity generation. For financings relating to new nuclear power, we conduct enhanced due diligence. In addition to environmental, health and safety (EHS) track record and governance, we take into account key considerations such as procedures around safe waste management practices; the secure transport, storage and handling of nuclear material; the host country’s legal, regulatory and safety framework; risks around terrorism and proliferation of nuclear weapons; proximity to seismic zones; fuel supply and water usage; and any possible community impacts and opposition.

Cross-Sector Guidelines

  • Protected Areas And World Heritage Sites*

    We recognize the importance of critical natural habitats, which have high biodiversity value and includes legally protected areas both existing and officially proposed by governments. Our Environmental Policy Framework discusses our approach to Protected Areas and World Heritage Sites, which includes prohibitions on financing any projects or initiating loans where the specified use of proceeds would significantly convert or degrade a critical natural habitat. We also recognize the significance of cultural and natural heritage and will not knowingly finance extractive projects, commercial logging or other environmentally sensitive projects in prescribed UNESCO World Heritage sites.  Furthermore, we will not finance projects that contravene any relevant international environmental agreement which has been enacted into the law of, or otherwise has the force of law in, the country in which the project is located.

  • Human Rights*

    We recognize that environmental and social issues are often linked. We have a responsibility to help protect, preserve and promote human rights around the world. Our Business Principles and our Code of Business Conduct and Ethics also play an important role in determining our responsibilities as corporate citizens, and help to inform our business selection process and guide our business decisions and judgments. See the Goldman Sachs Statement on Human Rights.

    We recognize that the identities and cultures of indigenous peoples are inextricably linked to the lands on which they live and the natural resources on which they depend. Our Environmental Policy Framework discusses our approach toward transactions which may have the potential to directly impact indigenous peoples, where we expect our clients to demonstrate alignment with the objectives and requirements of IFC Performance Standard 7 on Indigenous Peoples, including free, prior and informed consent. It includes our approach to stakeholder engagement and resettlement, where, we expect our clients to demonstrate an appropriate stakeholder engagement process for certain transactions where there could be material effects on local communities. In cases where there is large-scale resettlement, we will closely evaluate the stakeholder engagement process and, if appropriate, work with the company to improve aspects such as compensation measures and/or community engagement. In addition, it includes our stance not to knowingly finance any potential transaction where there is credible evidence of child labor, forced labor or human trafficking.

  • Climate Change*

    As a global financial institution, we serve clients in all industries, including those in carbon intensive sectors of the global economy. Our enhanced due diligence guidelines for carbon intensive sectors incorporate climate change-related questions, including the disclosure and management of greenhouse gas emissions. More broadly, even in less carbon-exposed sectors, as part of our due diligence where material and relevant, we consider how clients manage climate change-related risk factors such as those relating to supply chain risk from weather extremes. Such enhanced due diligence enables us to better manage the associated long-term risks and more responsibly serve the needs of our clients.

    In financings, we primarily act as an underwriter in the capital markets, matching investors with the capital needs of issuers. Lending to carbon intensive sectors is a relatively small part of our overall activities. Even though it is a small share, as part of our prudent risk management, we monitor how carbon related regulation among other material macro-factors may impact the creditworthiness of these loans to carbon intensive sectors. Our public reporting includes disclosure of our credit exposure to the Natural Resources and Utilities sector.

    For example, for energy investments in our Merchant Banking Division, in addition to enhanced environmental, health and safety due diligence, we undertake an assessment of pending policy and regulation related to climate change as well as the economics of various technologies. When relevant, we also conduct assessments of different carbon pricing and energy demand scenarios to inform our investment decisions. Based on such analysis, our energy investment portfolio has made a number of renewable energy investments globally.

    More broadly, we monitor policy and regulatory developments relating to climate change and where appropriate, engage in discussions regarding financing for climate mitigation and adaptation. We also engage in efforts to understand and inform the measurement and reporting of greenhouse gas emissions, as well as initiatives that seek to develop pragmatic and meaningful ways of understanding carbon risk exposure in financing and investment activities.

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*denotes guidelines also included in Environmental Policy Framework – Our Business Section II. Environmental and Social Risk Management
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