US firms step up on ESG: Goldman launches ‘sustainability group’ as Moody’s bags Four Twenty Seven

Goldman claims social impact has ‘long been a core element of the firm’s culture’

Goldman Sachs has today announced the launch of a Sustainable Finance Group and ratings giant Moody’s has acquired climate data house Four Twenty Seven, in signs of growing activity from US firms in the space.
In an email to all Goldman Sachs staff this morning, CEO David Solomon, COO John Waldron and CFO Stephen Scherr unveiled the new unit, describing sustainability as a “strategic priority” and pledging to “develop specific goals and objectives for our work in this area” in coming months.
Details are sketchy, but the letter said the new group will work with existing Goldman Sachs businesses to “better serve our clients, drive innovation and capture emerging opportunities as sustainable growth becomes more top of mind for investors, institutions and companies around the world”.
It will be headed by John Goldstein, whose impact investment house Imprint Capital was bought by Goldman in 2015. Kara Succoso Mangone, Managing Director of Investor Relations will be COO. A steering committee will be established “comprising senior business leaders who are already engaged with our clients on these opportunities”.
As well as broader sustainability, Goldman refers to impact investing as a focus of the initiative.
“A commitment to deploying our expertise and position in the capital markets to help address issues that impact society has long been a core element of the firm’s culture,” the email says, pointing specifically to inclusive economic growth and climate change.
Goldman Sachs has long been a controversial figure when it comes to responsible investment and sustainability, having been accused of misleading investors and making big returns off the back of the financial crash of 2007/8.The SEC filed a lawsuit against the bank as a result of its role in the crisis. Its focus on inclusive growth is likely to come under particular scrutiny, as it was widely slammed for squirrelling away more than $11bn for bankers bonuses in the first half of 2019, despite requiring government support to help it stay afloat after the crash.
Meanwhile, Moody’s has taken another small ESG data provider off the market in its latest acquisition. Having bought a majority stake in Vigeo Eiris in April, it has now bagged a majority stake in Four Twenty Seven – a US-based specialist in climate risk modelling – for an undisclosed sum. While Vigeo Eiris provides traditional ESG research and scores, as well as ‘second party opinions’ for sustainability bonds, Four Twenty Seven is more niche: it scores physical climate and environmental risks to companies and portfolios, making its services more aligned with the growing demand for climate-based scenario analysis, as required under the Taskforce for Climate-related Financial Disclosures.
The deal will help Moody’s “work to advance global standards for assessing environmental and climate risk factors”, it said. “Four Twenty Seven will also strengthen Moody’s growing thought leadership and research on incorporating climate risk into economic modelling and credit ratings.” ESMA has just rejected the suggestion by the European Commission that credit ratings agencies should systematically include sustainability in their assessments, but the industry is still under a lot of pressure to take the lead in incorporating climate risks into ratings.
The latest deal was financed with “cash on hand”, Moody’s confirmed. Four Twenty Seven will retain its California headquarter and its brand name.