- Goldman Sachs launched its first environment, social and governance (ESG) sight deposit account with water technology company Xylem as its first client, the companies said in a press release on Monday. .
- The product, through Goldman Sachs’ transaction-banking (TxB) unit, links the return clients earn to the achievement of ESG goals clients set for themselves.
- Goldman at the end of 2019 pledged to fund $ 750 billion in loans, underwriting, advisory services and investments for businesses and projects focused on renewable energy, sustainable transportation, affordable education and other areas on 10 years. At the time, this was the most significant engagement of one of the six largest American banks. Bank of America, Citi and JPMorgan Chase have since increased their pledges to $ 1,000 billion or more.
Goldman said on its 2020 Investor Day that it wanted to rely more on banking transactions – the business of moving money around the world for large companies through services such as cash management. and cash. To that end, it launched banking transactions in the United States last June and, in its first year, attracted 250 customers and $ 35 billion in deposits.
Goldman started offering transaction services in the UK in June of this year. The bank said in 2020 it was confident its consumer and transaction banking segments could generate $ 1 billion in annual revenue by 2025.
In 2019, Xylem – named after the water transport mechanism in factories – signed an $ 800 million revolving credit facility that tied a floating interest rate to the company’s sustainability performance, a first in the water technology industry, according to Smart Water magazine.
The company finalized a $ 1 billion green bond offering in senior unsecured notes a year later. The proceeds were funneled through Xylem’s green finance and distributed in a number of eligible sustainability-focused projects, such as manufacturing products that improve water quality and researching water detection systems. water leaks that reduce waste.
“This ESGThe linked account is strongly aligned with our view that sustainability should be at the heart of our business strategy and our funding approach, ”said Sandy Rowland, CFO of Xylem, in Monday’s press release. “Banking products that recognize and reward ESG achievement is a welcome step forward in the interdependent management of finance and sustainability. This account does that while providing the flexibility we need to manage cash and payments. “
Goldman Sachs CEO David Solomon, announcing the bank’s ESG efforts in 2019, said, “Companies have traditionally treated sustainability as a peripheral issue,” Solomon wrote. “We no longer have the luxury of this limited perspective.” The bank said in March it had committed $ 156 billion towards its $ 750 billion target.
The ESG loan market has grown dozens of times over the past year, according to data provider Dealogic. Around $ 85.5 billion of ESG facilities were put in place in the first quarter of 2021, up 93.9% from the same period in 2020.
The ESG link has gained momentum elsewhere in finance this year. Investment firm BlackRock has agreed to pay a higher or lower annual interest rate and commitment fee to a group of lenders on a $ 4.4 billion credit facility based on its improvement over to certain ESG criteria. In particular, the company aims to increase the proportion of Blacks and Latinxs it employs to 30% by 2024.