Green, Social and Impact Bond Engagement Report

Green, Social and Impact Bond Engagement Report

In this report, we concentrate on the investment research and monitoring carried out by our Green, Social and Impact Bond (GSI) team in 2023.

Investment Research and Monitoring by Our Green, Social and Impact Bond Team in 2023

At Goldman Sachs Asset Management we classify our engagements into four categories: 

  • Thematic engagements
  • Proxy-related discussions
  • Providing ESG feedback
  • Investment research and monitoring

In this report we concentrate on the investment research and monitoring carried out by our Green, Social and Impact Bond (GSI) team in 2023. This involves investment research and monitoring of specific environmental, social and governance issues that are key to our investment decision making processes. We define "investment research and monitoring engagements" as active dialogue or exchange of written communication with a company or issuers undertaken primarily to seek information or to inform our investment decisions. For example, research analysts engaging on earnings, business operations, or other strategic matters.

This report forms part of the wider Annual Impact Report produced by the GSI team and provides further information about the investment research and monitoring undertaken by the team during the year.

Overview1

We may evaluate issuers’ corporate strategies, investment and financing activities, management incentives, resource use, regulatory policies, and environmental and social impact, as well as overall effect on and engagement with consumers, workers and the communities in which they operate to assess and promote long-term value creation. Engagement helps us determine whether an issuer’s green, social and impact bonds may be eligible for our green, social and impact bond strategies.  

This communication with issuers forms a key part of our assessment of green, social and impact bonds. We have developed a proprietary platform, Fluent, which allows users to track issuer views and engagements and to incorporate this information, where material, into investment decisions. All members of the public markets investing business have access to Fluent. 

In 2023 our investment research and monitoring focused on five main areas: 

  • General Pre-Issuance Investment Research 
  • General Post-Issuance Investment Research 
  • Regions And Sectors Where There Have Historically Been Limited Issuance of Labelled Bonds 
  • Investment Research on Specific Topics 
  • Keeping Up Our Regular Two-Year Communication Target with Issuers Held in The GSI Strategies 

 

The specific topics we discussed with issuers generally focused on four key themes in 2023: 

  • Ecological Impact and Land Use (Specifically Biodiversity) 
  • Pollution (Specifically the Circular Economy) 
  • Human Rights and Labor Rights 
  • Human Capital and Workforce Management (Specifically the Just Transition) 

2023 Findings

In 2023, 177 investment research and monitoring communications took place with 171 issuers – significantly more than the 89 issuer communications that took place in 2022. These included 9 sovereign issuers, 55 government-related issuers and 107 corporate issuers and involved on-site meetings, video calls, survey responses and email communications.2

The proportion of the GSI team’s communications with non-European issuers increased in 2023, as we can see in the figure below. 

Investment and monitoring by issuer regionInvestment and monitoring by issuer region (2022 vs 2023)

Source: Goldman Sachs Asset Management, as of January 31, 2024.

However, European issuers still accounted for around 65% of our communications, followed by 14% in Asia (including Japan) and 12% in North America. Issuers from other regions accounted for 7%. Compared with 2022, we had more communication with issuers from regions that are traditionally less commonly seen in the labelled bond market, such as the Middle East.3

The sector breakdown of the issuers we monitored remained largely unchanged. Financials and sovereigns combined accounted for almost 60% of our communications, followed by utilities, materials, industrials and consumer discretionary. 

2023 investment research and monitoring by issuer sector2023 investment research and monitoring by issuer sector

Source: Goldman Sachs Asset Management, as of January 31, 2024.

Looking to 2024

Our investment monitoring and research in 2023 provided us with a view of where the labelled bond market is in terms of how it considers various issues, such as frameworks, impact reporting and how issuers integrate important topics in business practices. We saw issuers from new regions and sectors enter the market and we provided considerable feedback to market participants. We hope to see improvements in how issuers integrate key topics in 2024 and look forward to meaningful issuer-investor communication during the year.