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Goldman Sachs - Accelerating The Grid’s Transition To Renewable Energy Through Investment Banking


Goldman Sachs via Money.ca

Goldman Sachs Group, Inc., (Goldman Sachs) is a leading global investment bank and financial services company that provides services across investment banking, securities, investment management, and consumer financial services to corporations, financial institutions, governments and individuals.  According to their 2022 Annual Report, after a December 2022 reorganization, they now segment their business into three lines: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.  The latter encompasses consumer platforms, such as credit cards and point-of-sale financing, and the transaction banking business.   In January of 2024 Goldman reported net revenues of $46.25 billion for 2023. They further reported $1.642 trillion in total assets as of December 31, 2023, per their 4th quarter Earnings Release for the same year.  The bank has been a pioneer in the financial world since its inception in 1869, and with its headquarters in New York along with offices in all major financial centers worldwide.


Pioneering The Grid's Transition To Renewables 


In recent years, Goldman Sachs has also made substantial strides as a pioneer in the realm of sustainability, demonstrating a commitment to environmental stewardship and the transition to a low-carbon economy. The firm's sustainability journey began in earnest in 2005 with the establishment of the Environmental Policy Framework, which articulated the firm's belief in the importance of a healthy environment and its commitment to addressing environmental challenges. In 2015 the firm joined the RE100 and set a target to be 100% powered by renewable electricity by 2020.  By April of 2020 Goldman Sachs announced that they had met 98% of their electricity needs with renewable energy by year end 2019 putting them ahead of their 2020 goal.  They also committed to sourcing 80% of their renewable energy from long-term PPAs and on-site projects by 2025. A clear statement of intent to prioritize subsidizing the development of new renewable energy projects supporting the grid’s ability to transition away from fossil fuels.


Lloyd C. Blankfein, Former CEO and Chairman - Goldman Sachs 2006-2018

While it’s unclear whether Goldman Sachs has been able to take the necessary steps to meet that commitment as of 2024 in the US, it’s not for the lack of trying.  In 2017, the firm announced that it had signed a long-term power purchase agreement (PPA) with NextEra Energy to enable a new 68 megawatt wind project.  At the time, Lloyd C. Blankfein, Chairman and CEO said: "We are committed to being a leader in the development of renewable energy. By enabling this new wind project to come online, the agreement will help grow the renewable grid."  Generation from the wind farm was expected to come online in 2019.


However, whether it did come online and the degree to which it impacted Goldman Sachs’ sourcing of 100% renewable electricity in the US is the question.  Commendably, in addition to being an RE100 member, the firm also counts itself as a member of the EPA’s Green Power Partnership (GPP) and is listed among a number of ambitious companies who have already reached 100% renewable electricity in their operations.  Goldman Sachs’ GPP reporting indicates that in 2023 the firm at least partially met its 100% renewable electricity commitment using traditional RECs to cover 276,605 MWh in 2022 and 288,361 MWh in 2023 of its purchased electricity.  The firm’s Carbon Emission Reporting for 2022 shows that total electricity consumed for 2022 was 448,939 MWh of electricity, and that “Green Power” accounted for, and offset, the exact same amount.  Provided that the Pennsylvania project did come online, using some traditional calculations to establish the annual MWh expected to be generated by the project, somewhere between 1,700 and 2,200 MWh per year, at best it accounted for 149,600 MWh annually (68 MW x 2,200 MWh) in both power and renewable attributes (RECs) for Goldman Sachs in 2022.  The part that makes this unclear is that there is no mention of the project in the firm’s  GPP reporting, 2022 Sustainability Report, or 2022 Carbon Emission Reporting of the RECs that it provides if it came online in 2019.  This leads to one of two conclusions which is that the project is delayed and did not come online, or it failed to deliver altogether.  Both are examples of the downsides to using a PPA/VPPA to procure renewable electricity for sustainability goals. 


John Goldstein, Global Head of Sustainability and Impact Solutions, Asset & Wealth Management - Goldman Sachs

It should be noted that Goldman Sachs has since announced other PPAs in the UK and made accelerating the transition to renewables a major part of its business line supporting other corporates with their procurement of renewable electricity via PPAsVPPAs. The company is also helping deploy $750 billion in sustainable finance across investing, financing and advisory services for clients by 2030. John Goldstein, head of Goldman's Sustainable Finance Group said: "We’ve long believed the transition to a more sustainable economy would be a decades-long effort...In solving such a complex problem lies enormous opportunity for our clients."


Opportunities Moving Forward As Goldman Sachs Seeks to Maintain Its 100% Renewable Electricity Goal 


Goldman Sachs’ efforts to source renewable electricity are clearly laudable.  Provided their PPAs have, or will, come online there’s no argument that the firm is committed to accelerating the grid’s transition to renewable energy by subsidizing new generation.  And, as an investment bank, they are doubling down on that by supporting other corporations in their effort to do the same.  Notably, while RECs are, and will continue to be, an important tool for emissions reductions and increasing renewable energy demand, additionality RECs can provide further positive impacts for Goldman Sachs:


Speeding Grid Transformation: Given the firm’s commitment to accelerating the grid's transition to renewables, use of RECs with Additionality would allow them to increase that acceleration.  Because Additionality RECs don’t require the need to search for a particular project, they can come from any project or projects under development, Goldman Sachs could procure them for its entire load of consumed electricity and bring more than just one project on line at a time.  This would be an exponential increase of the pace of change towards decarbonization.  It would also help address constraints around transmission, siting, and financing that can slow a project's ability to come online.


Cost Mitigation: As additional projects come online over time, costs decline through technology improvements and scale effects. This makes maintaining 100% renewable electricity procurement more affordable in the long run.  Using Additionality RECs to subsidize more than one project at a time would give them the ability to directly contribute to cost reduction for the benefit of themselves and other corporate customers they serve looking to subsidize new renewable energy projects.


Marketing Credibility: RECs directly linked to new projects enable companies to make substantiated claims about enabling the grid to transition to renewable energy and strengthen their emissions reductions. Goldman Sachs is openly committed to that transition and accelerating it both operationally and when serving its customers.  Use of Additionality RECs would allow them to go all in on this commitment, not only for themselves but potentially if they introduced them to their customers.  Thus it would help strengthen environmental commitments made to all stakeholders in its business.


Emissions Reduction At Scale: With business growth comes increased consumption and a rise in emissions over time, typically.  Additionality RECs provide a mechanism to match rising demand and scale renewable energy investments. This maintains emission reduction integrity at a scale that can match business scale.


In conclusion, Goldman Sachs has demonstrated a strong commitment to sustainability and renewable energy. The firm's efforts to source 100% renewable electricity and its innovative partnerships to develop new renewable energy projects underscore its leadership in the transition to a low-carbon economy. By considering RECs with additionality, Goldman Sachs could further enhance its sustainability commitment and strategy allowing them to build on their leadership.  Additionality RECs can help the firm cost-effectively uphold its 100% renewable commitment, while accelerating the broader transition to renewable energy withs customers. Ultimately, Goldman Sachs progress on sustainability helps position them for success in a net zero economy while enabling meaningful climate action. 

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