Targeting Sustainable Corporate Performance: GS SUSTAIN
In 2007, Goldman Sachs launches GS SUSTAIN, a global, long-term investment research strategy designed to generate sustainable alpha by integrating analysis of financial strength, strategic positioning, and environmental, social and governance performance.
In 2003, Goldman Sachs was invited to participate in the Asset Management Working Group (AMWG) of the United Nations Environment Program Finance Initiative (UNEP-FI). This group would work to identify environmental and social issues likely to materially affect company competitiveness in the global energy industry and, to the extent possible, quantify their potential impact on stock prices.
The timing of the initiative was propitious, as companies across all industries were operating in a changing and challenging environment. Globalization, shifting political landscapes, growing urbanization, climate change, and evolving employee and consumer attitudes were just some of the forces corporations had to contend with. For investors, these dynamics only increased the importance of identifying future industry leaders and avoiding those companies that would be disadvantaged by the direction and rapid pace of change.
Recognizing that all companies must interact with four key dynamics—the economy in general, their industry, society, and the environment—Goldman Sachs spent several years refining a proprietary framework for long-term, returns-based securities analysis that incorporated financial strength, strategic positioning, and environmental, social and governance (ESG) performance.
These efforts culminated in the 2007 launch of GS SUSTAIN. At the UN Global Compact Leaders Summit in Geneva, Switzerland, that year, the firm presented its research findings, as well as a focus list of companies it identified as having the greatest potential for outperformance based on the GS SUSTAIN framework. One year later, Goldman Sachs Asset Management (GSAM) launched the Goldman Sachs Sustain Portfolio, an innovative global equity fund based on the GS SUSTAIN focus list.
From its inception in 2007 through year-end 2017, the GS SUSTAIN 50 List outperformed its global benchmark (the MSCI ACWI, an index capturing 85 percent of the global investable mid-and large-cap equity universe) by a full 40 percent. By that time, the GS SUSTAIN team within the firm’s Global Investment Research division covered 4,000 companies across global economic sectors.
Through GS SUSTAIN, Goldman Sachs is at the forefront of integrating ESG criteria into the fundamental analysis of global companies and bringing greater investor attention to the importance of such factors in identifying companies that are best positioned to manage 21st-century business risks.