Sustainable Finance and Davos 2020
The article below is from our BRIEFINGS newsletter of 28 January 2020
Last week, leaders from the public and private sectors convened in Davos, Switzerland for the annual meeting of the World Economic Forum. Three members of the firm’s delegation – Gregg Lemkau and Dina Powell of the Investment Banking Division, and Sheila Patel of the Consumer and Investment Management Division – share their takeaways from the week’s events.
Davos always means dozens of meetings, events and panel discussions. What were the dominant themes of the week?
Gregg Lemkau: Discussion about climate change reigned supreme this year. The topic of ESG has been part of nearly every discussion we have had as a firm with companies, boards and investors in the past year, and Davos only confirmed further that it’s going to remain top of mind for the business community for the foreseeable future.
Dina Powell: At Davos, there was a particular focus on areas where the public and private sector can partner to make meaningful progress on some of these core issues like climate, inequality and diversity among leadership teams.
Sheila Patel: Sustainability—but not everyone agreed on what that means. Our efforts as a firm to put a frame around this, led by David Solomon’s Financial Times op-ed, the firm’s sustainability report, and our focus on key issues like climate change and inclusive growth tapped into the key concerns all stakeholders share.
Goldman Sachs made some news of its own during the event with an announcement of a new commitment on board diversity for our IPO clients. How does that fit into some of the dialogue around ESG?
Sheila Patel: One of the surprising things to me about the sustainability discussion today is how many people are still thinking of ESG as purely about "doing good." It’s clear to us at Goldman Sachs that driving global growth—and broad participation in that growth—is absolutely critical to the long-term prospects of any organization. We have a unique opportunity at the firm to make the connections apparent and actionable, given the many different ways in which we work with clients.
Gregg Lemkau: To Sheila’s point, the business case was front and center in making this announcement. Our decision to only underwrite the IPOs of private companies with at least one diverse board director, increasing to two in 2021, is rooted in our conviction that companies with diverse leadership perform better from an economic and returns standpoint. It’s simply the best advice for any company preparing to go public, with all the responsibilities that entails. But in addition to the real commercial benefits, it’s clear that changing the stereotypes associated with corporate decision-making will have many positive effects for society as a whole.
Where does the dialogue go from here?
Sheila Patel: We need more examples of how to be part of the change that we want to see— sustainability in action. Our efforts to vote our proxies in Goldman Sachs Asset Management to align with our principles—such as diversity on boards and climate change—and the firm’s new IPO policy regarding board diversity are some examples of the “purpose-driven actions” we need to see coming from global forums such as Davos.
Dina Powell: I imagine that discussions on the topic of diversity in corporate governance will become even more prominent. As David mentioned in his announcement, over the past four years, US companies that have gone public with at least one woman board director outperformed companies that do not, one year post-IPO. Because it’s sound business, I think this movement will ultimately drive significant change in the standards to which companies are held.