ESG at GS: Advancing ESG and Impact Investing
This article is part of our ESG at GS series for the Careers blog where we highlight a theme from our Environmental, Social and Governance Report and hear from some of our people who do ESG-related work at Goldman Sachs.
In our latest Environmental, Social and Governance Report, we highlight ESG and impact investing—one of the fastest-growing areas of our Investment Management Division.
This growth is propelled by a significant increase in investor interest, combined with our ability to deliver differentiated, innovative investment strategies with distinct environmental and social impact. In addition to dedicated ESG and impact strategies, we incorporate the consideration of ESG factors in our investment strategies across our business, where and when they are material.
Fundamental to the growth of ESG and impact investing is an increased understanding that a disciplined approach may generate competitive risk-adjusted returns while also driving measurable social and environmental impacts.
Megan Starr, a vice president in our Investment Management Division (IMD), works in ESG and impact investing within IMD. We had an opportunity to ask her about some of the developments in this area.
Q. Can you talk about the growth you’ve seen in this space and some of the drivers?
Megan Starr: Assets under supervision in our ESG and impact investing business continue to grow at a brisk pace. ESG and impact investing allows clients to achieve a range of objectives, from aligning their investments with their beliefs or views, to considering ESG factors as a means to manage risk and optimize long-term value, to pursuing measurable environmental and social impact through private market investments. We’ve seen a significant increase in the number of clients looking to achieve these objectives, and our ability to deliver innovative and differentiated solutions has enabled us to scale the business rapidly. We now have more than $15 billion in ESG and impact investing asset, which is up from $3.8 billion in 2015—roughly quadrupling in less than three years.
Q. Tell us how data insights play an important role in identifying investment opportunities.
MS: ESG data are starting to play an increasingly significant role in our ongoing research into both investment risks and return opportunities across asset classes. For example, we’ve seen that more efficient companies, and those that minimize negative impacts to the environment per dollar of revenue, tend to trade at a premium. We are now employing ESG as a data-driven, alpha-additive investment signal in our equity insights process—helping us to identify strong investments going forward.
Q. What was your career path to ESG and impact investing?
MS: I grew up somewhat off-the-grid on Cape Cod: My family chopped wood for heat, had solar panels for electricity, and grew a lot of our own food. This focus on sustainability led me to study environmental science and public policy as an undergrad, focusing on climate change. After graduation, I worked at a foundation where I experienced some of the challenges of philanthropic capital in trying to effect change in sectors such as the transition to a lower carbon economy. Market-based solutions seemed potentially more effective at driving scale—so I went to business school to learn more about this emerging field of ESG and impact investing. Before graduating, I interned at Goldman Sachs in IMD where its leaders were developing an ESG and impact platform. I joined the firm after graduating and months later the firm acquired an ESG and impact investing advisory firm called Imprint Capital. We’ve been building the business ever since, and now have dozens of professionals dedicated to helping clients integrate ESG and impact into their investments. It’s been great to work in a field that I’m deeply passionate about and to help build this area within the firm.