The Great ESG Reset

The Great ESG Reset
Claire Hedley
Goldman Sachs Asset Management
June 2021
Goldman Sachs Asset Management International is authorised by the Financial Services Board of South Africa as a financial services provider.
FOR INSTITUTIONAL OR FINANCIAL INTERMEDIARIES USE ONLY – NOT FOR USE AND/OR DISTRIBUTION TO THE GENERAL PUBLIC
Today’s agenda….
1 Market tailwinds are accelerating growth in global sustainability themes
2 ESG is an investment function that targets market rate financial returns
3 There is increasing evidence that ESG leads to outperformance
4 ESG may be implemented across a portfolio to address risks and identify opportunities
5 Lessons learned and implementation best practices
Source: AIMS Imprint, as of April 2021. For discussion purposes only. Goldman Sachs Asset Management leverages the resources of Goldman Sachs & Co. LLC subject to legal, internal and regulatory
restrictions. The track record information and operational commitments on this page also relate to Goldman Sachs’s sustainability practices and track record at an organizational and investment team level,
which may not be reflected in the portfolio of the product(s).
2
Dynamics driving a secular trend towards sustainable growth
Secular Trends Sustainable Growth
Climate
Transition
Growing Changing Improving

Consequences Preferences Economics Inclusive
Growth
Climate Risk, Social Consumers, Workers, Drive for efficiency,
Tension Transparency Companies, Asset innovation and growth
and Connectedness Owners and Regulators
3
Where is the industry at today?
$1.5tn ESG AUM1
~3,000 ESG Funds Globally1
$271bn ESG equity fund flows in 20201
28% Increase in number of PRI signatories since 20192
70% Corporations highlighted ESG/governance developments in proxy letters to shareholders3
121% Increase in S&P companies citing ESG on earnings call in 20204
Source: 1Goldman Sachs Global Investment Research. ESG fund favorites of the green recovery a.o. 3/20/2021 2Goldman Sachs Global Investment Research. A look back at 2020, and outlook for 2021
a.o. 1/5/2021 3ESG Disclosure in 2020 Proxy Statements, Kelly Huennekens Nasdaq 5/13/2024 More than One In Four S&P 500 Companies Cited “ESG” On Earnings Calls, John Butters Insights as of
3/5/2021.
4
ESG 1.0 vs. 2.0
VALUES INVESTMENT
DRIVEN DRIVEN
ESG 2.0 is Not:
Screening Labeling Scoring
Screening, labeling, and scoring refer to common descriptions of the early forms of ESG investing. For illustrative purposes only.
5
What are Environmental, Social and Governance (ESG) factors
and why are investors focused on them?
Environmental Social Governance

Carbon emissions Human rights Compensation structure
Water consumption Gender and racial diversity Board Structure
Waste management Labor relations Risk Management
Sustainable sourcing Data protection and privacy Codes of Conduct
Green buildings Community relations and impact Transparency
Source: Goldman Sachs Asset Management As of February 2021. For illustrative purposes only.
6
Materiality matters in ESG
Infrastructure Financials
Materiality is key
GHG Emissions to outperformance:
Air Quality
Energy Management
Environmental
Water & Wastewater Management A study found that
Waste & Hazardous Materials Management companies that
Ecological Impacts focused on material
Human Rights & Community Relations
Customer Privacy
ESG factors
Data Security outperformed
Access & Affordability those that focused
Product Quality & Safety
Social
Customer Welfare
on immaterial ESG
Selling Practices & Product Labeling factors by 5.4%
Labor Practices annually1
Employee Health & Safety
Employee Engagement, Diversity & Inclusion
Product Design & Lifecycle Management
Business Model Resilience
Supply Chain Management
Materials Sourcing & Efficiency
Governance & Physical Impacts of Climate Change
Business Model Business Ethics
Competitive Behavior
Management of the Legal & Regulatory Environment
Critical Incident Risk Management
Systemic Risk Management
Source: Goldman Sachs Asset Management. Sustainability Accounting Standards Board, as of June 30, 2019. Darker blue represents more material. 1 Source: Harvard Business School, Corporate Sustainability: First Evidence on Materiality,
2015. For informational purposes only and should not be construed as research, investment advice or a recommendation. There is no guarantee that these objectives will be met.
7
Active ownership can help drive positive change
Engagement Proxy Voting Industry Affiliations
As stakeholders in businesses there is a vested interest in helping them improve
Source: Goldman Sachs Asset Management, as of June 30, 2019. For informational purposes only and should not be construed as research, investment advice or a recommendation. There is no guarantee
that these objectives will be met.
8
How have ‘good companies’ performed?
JUST Companies have come back more quickly Equity returns may be linked to employee satisfaction
2020 Indexed Return (%) US Large Cap Cumulative Excess Return 2011 – 2019 (%)
140 JUST Industry Leaders Russell 1000 Index
32% 10.5
130
5.8
120
110 19% 0.7
100
-0.4
90
80
70
60
-16.7 Company Quintile Based on Employee Satisfaction
1 (Bottom) 2 3 4 5 (Top)
Left chart source: Bloomberg, JUST Capital, and Goldman Sachs Asset Management. JUST companies or industry leaders are top performing companies in each sector based on their leadership on the issues Americans care about most. The issues are based on
the JUST Capital’s survey. As of December 31, 2020. Past performance does not guarantee future results, which may vary. Right chart source: Goldman Sachs Asset Management Quantitative Investment Strategies (QIS), Glassdoor, and Thinknum Alternative
Data. As of April 2020, latest available. The analysis is based on data for US large cap companies. Cumulative excess return is relative to the average return across quintiles. Stocks are equally weighted within quintiles.
9
Active ESG funds performance
Top Quartile Active ESG equity Funds Return Attribution

% of US large cap ESG funds in top/bottom quartile
(Q1 2020)
Active US large cap equity ESG funds performance
Overrepresented
% of Active US Large Cap Equity ESG Funds
Top Quartile Bottom Quartile
38% 37% Security
32% Selection,
66.7%
25%
18%
Underrepresented
16%
9% Sector
Selection,
33.3%
Q1 2020 2020 2016 - 2020 Average Active Return Attribution
Left Chart Source: Source: Morningstar and Goldman Sachs Asset Management. As of December 31, 2020. The analysis is based on oldest share classes of the US domiciled US Large cap funds in Large Blend, Large
Growth, and Large Value Morningstar categories and the funds are quartiled based on performance. For Q1 2020, 2020, and 2016 - 2020 periods there were 1015, 962, and 847 active funds in the universe, respectively.
Past performance does not guarantee future results, which may vary. Right Chart Source: Morningstar and Goldman Sachs Asset Management. As of April 30, 2020. The analysis is based on global ESG active mutual
funds as defined by Morningstar from January 2020 – March 2020. * ESG funds only include those funds that use ESG as a determinative criterion in security selection.
10
Global active ESG mutual funds landscape
The Number and Size of ESG Investments Have Increased Rapidly
1,600 6,000
AUM (LHS, $Bn) # Products (RHS)
1,400
5,000
1,200
4,000
1,000
800 3,000
600
2,000
400
1,000
200
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Morningstar and Goldman Sachs Asset Management. As of December 31, 2020. * ESG funds only include those funds that use ESG as a determinative criterion in security selection
11
Global ETF landscape
The number and size of ESG ETFs have increased rapidly
80,000 160
AUM (LHS, $mn) # Products (RHS)
70,000 140
# of ESG ETFs
60,000 120
grew ~4.6x since 2015
50,000 100
40,000 80
30,000 60
20,000 40
10,000 20
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Bloomberg and Goldman Sachs Asset Management. As of December 31, 2020. “ETF” refers to exchange-traded fund. * ESG funds only include those funds that use ESG as a determinative
criterion in security selection
12
ESG equity fund flows have been increasing
Source: Morningstar. * ESG funds only include those funds that use ESG as a determinative criterion in security selection; only equity funds displayed for both groups.
13
As well as increasing regulation, particularly in Europe
Article 6
Sustainable Finance Disclosure Article 8
Regulation (“SFDR”)
Article 9
EU Taxonomy Alignment 6 Environmental Objectives
MIFID II Suitability and Product Suitability assessment for sustainability

Governance Amendments preferences
14
ESG investment objectives may be applied across a framework
that seeks to identify risks, opportunities, or both
LEFT TAIL RIGHT TAIL

“Risk Alpha” “Opportunity Alpha”
POTENTIAL
RETURNS
APPROACH  Address left-tail downside risk  Evaluate material ESG factors to  Capitalize on potential right-tail
such as regulatory changes and mitigate risks and identify opportunities driven by ESG
carbon taxes opportunities themes and trends
EXAMPLE  Low Emissions Climate Tilt equity  Fixed income strategy  Environmental impact equity
STRATEGIES strategy  Fundamental equity strategy strategy
 Climate-focused fixed income  Private Equity Impact or
strategy Renewable Power Alternative
Credit strategy
Tracking
LOW Error HIGH
Source: Goldman Sachs Asset Management, as of 30-Apr-2021. For illustrative purposes only and should not be construed as research, investment advice, or a recommendation. There is no guarantee that
objectives will be met. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
15
Getting started
Whether you’re looking to dip a toe in the space or fully integrate your portfolio with your values, investors can get started with ESG investing
with varying levels of intensity.
Toe in the water Deeper alignment Fully integrated
 Transition fixed income and passive US  Integrate market rate ESG and impact  Adjust asset allocations to increase impact
large cap equity allocations to ESG strategies across the rest of an asset class
strategies allocation, where possible  Use impact investing as a tool to further
their missions
 Allocate to private equity impact investing
strategies  Consider seeding new products
16
Lessons Learned and Best Practices
Consider integrating ESG into traditional asset management

 Investors may not need to sacrifice returns to achieve impact
1
 To achieve optimal levels of both financial returns and desired impact, investors have been increasingly
weaving ESG and impact investing across entire portfolios
Be wary of broad ESG data and apply the right tools

 High-level ESG labels do not capture the potential alpha opportunities and strategic advantages of
2 companies who incorporate ESG factors
 Search for meaningful granular ESG metrics to capture potential alpha opportunities
Consider ESG investing as a process, not a singular act

3  All processes have to start somewhere
 Enter, ease in, implement adjustments, then learn and expand from there
ESG and impact investing requires the same discipline and rigor as traditional investing
Source: Goldman Sachs Asset Management.
17
ESG and Impact Investing at Goldman Sachs
Well-established track record of sustainability leadership
Issued Inaugural
Achievement of $800mm
Carbon Neutrality For Sustainability
First Time Bond
GS Acquisition of Announced Net
Imprint Capital
Zero Climate
Inaugural Launched
Inaugural Commitment
$40bn Clean Energy Ten-Year
Environmental Policy $750bn
Financing & Investment Target Launch of
Framework Established
Announced Sustainable One Million
Finance
Commitment Black Women
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Led $39bn+
Launched
in COVID-Related
GS SUSTAIN within Leader in
Financings
Global Investment Green Bond
Research Market Expansion
Launch with GS
Black and Latinx
Entrepreneur Cohort
Reaffirmed Commitment to
Improve
Global Diversity
Firmwide sustainability goals are not binding characteristics of specific products. There is no guarantee that any particular ESG objective will be pursued or met with respect to any particular product.
19
Goldman Sachs Asset Management’s broad investment
management capabilities
Wide Breadth Of Investment Dedicated Holistic

Offerings Team Implementation Approach
We can implement ESG and impact We employ dedicated ESG and impact Our ESG and impact investing client
investing across public and private investing experts. strategy team can comprehensively
asset classes, through a combination of advise on a portfolio, implementing
In 2015, we acquired the assets of
open-architecture solutions and in- seamlessly across asset classes and
Imprint Capital Advisors, a leading
house products investment strategies, with a highly
ESG and impact investing investment
curated investment approach and
advisor. Imprint had advised on over 120
fiduciary mindset
impact investments across asset
classes and worked with 11 of the 25
largest U.S. foundations1
Source: Goldman Sachs Asset Management. 1 Prior to acquisition by Goldman Sachs Asset Management, Imprint Capital acted as a non-discretionary investment adviser, meaning that it recommended
investments to clients but clients made their own decisions about whether to invest. For discussion purposes only. Firmwide sustainability goals are not binding characteristics of specific products. There is
no guarantee that any particular ESG objective will be pursued or met with respect to any particular product.
20
Goldman Sachs Asset Management’s perspectives and
thought leadership
Podcasts and Video Interviews Website and Thought Leadership
Investment Strategy Pieces
Source: Goldman Sachs Asset Management. For illustrative purposes only.
21
Important Information
Equity securities are more volatile than fixed income securities and subject to greater risks. Small and mid-sized company stocks involve greater risks than those customarily associated with larger
companies.
Investments in foreign securities entail special risks such as currency, political, economic, and market risks. These risks are heightened in emerging markets.
Emerging markets securities may be less liquid and more volatile and are subject to a number of additional risks, including but not limited to currency fluctuations and political instability.
Investments in fixed-income securities are subject to credit and interest rate risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the
decline in the bond’s price. Credit risk is the risk that an issuer will default on payments of interest and principal. This risk is higher when investing in high yield bonds, also known as junk bonds, which have
lower ratings and are subject to greater volatility. All fixed income investments may be worth less than their original cost upon redemption or maturity.
The currency market affords investors a substantial degree of leverage. This leverage presents the potential for substantial profits but also entails a high degree of risk including the risk that losses may be
similarly substantial. Such transactions are considered suitable only for investors who are experienced in transactions of that kind. Currency fluctuations will also affect the value of an investment.
Alternative strategies often engage in leverage and other investment practices that are speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of
investment loss, including the entire amount that is invested. Manager experience. Manager risk includes those that exist within a manager’s organization, investment process or supporting systems and
infrastructure. There is also a potential for fund-level risks that arise from the way in which a manager constructs and manages the fund. Leverage. Leverage increases a fund’s sensitivity to market
movements. Funds that use leverage can be expected to be more “volatile” than other funds that do not use leverage. This means if the investments a fund buys decrease in market value, the value of the
fund’s shares will decrease by even more. Counterparty risk. Alternative strategies often make significant use of over-the-counter (OTC) derivatives and therefore are subject to the risk that counterparties
will not perform their obligations under such contracts. Liquidity risk. Alternative strategies may make investments that are illiquid or that may become less liquid in response to market developments. At
times, a fund may be unable to sell certain of its illiquid investments without a substantial drop in price, if at all. Valuation risk. There is risk that the values used by alternative strategies to price investments
may be different from those used by other investors to price the same investments.
Private equity investments are speculative, highly illiquid, involve a high degree of risk, have high fees and expenses that could reduce returns, and subject to the possibility of partial or total loss of fund
capital; they are, therefore, intended for experienced and sophisticated long-term investors who can accept such risks.
Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs whose underlying properties are concentrated in a particular
industry or geographic region are also subject to risks affecting such industries and regions. The securities of REITs involve greater risks than those associated with larger, more established companies and
may be subject to more abrupt or erratic price movements because of interest rate changes, economic conditions and other factors.
ESG strategies may take risks or eliminate exposures found in other strategies or broad market benchmarks that may cause performance to diverge from the performance of these other strategies or market
benchmarks. ESG strategies will be subject to the risks associated with their underlying investments’ asset classes. Further, the demand within certain markets or sectors that an ESG strategy targets may
not develop as forecasted or may develop more slowly than anticipated.
22
Additional Important Information
There may be additional risks that are not currently foreseen or considered.
Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns.
Investors cannot invest directly in indices.
This material is provided for informational purposes only. It is not an offer or solicitation to buy or sell any securities.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Goldman Sachs Asset Management to buy, sell, or hold any security. Views and opinions are
current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
This material has been prepared by Goldman Sachs Asset Management and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance
with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and
opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their
financial advisors before buying or selling any securities. This information may not be current and Goldman Sachs Asset Management has no obligation to provide any updates or changes.
Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss
of principal may occur.
The use of third party logos is purely for informational purposes. No affiliation, sponsorship or endorsement by or for any third party trademark owner is hereby expressed or implied.
In an effort to distinguish funds by what they own, as well as by their prospectus objectives and styles, Morningstar developed the Morningstar Categories. While the prospectus objective identifies a fund's
investment goals based on the wording in the fund prospectus, the Morningstar Category identifies funds based on their actual investment styles as measured by their underlying portfolio holdings (portfolio
and other statistics over the past three years).
©2021 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to
be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is not guarantee of future
results.
Glossary
The S&P 500 Index is the Standard & Poor’s 500 Composite Stock Prices Index of 500 stocks, an unmanaged index of common stock prices.
The Russell 3000 Index tracks the performance of the 3,000 largest U.S.-traded stocks which represent about 98% of all US incorporated equity securities.
The Russell 1000 Index comprises approximately 92% of the total market capitalization of all listed stocks in the US equity market and is considered a bellwether index for large-cap investing.
23
Additional Important Information
Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent
verification, the accuracy and completeness of all information available from public sources.
Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not take into
account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high
levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated,
based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to
these forecasts. Case studies and examples are for illustrative purposes only.
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.
In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs Asset Management International, which is authorized and regulated in the United Kingdom by the
Financial Conduct Authority.
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not an employee, officer, director, or authorized agent of the recipient.
© 2021 Goldman Sachs. All rights reserved.
Date of First Use: 5/27/2021. Compliance Code: 242252-OTU-1419117 / 242502-TMPL-05/2021-1419666
24

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The Great ESG Reset

1 Market tailwinds are accelerating growth in global sustainability themes

2 ESG is an investment function that targets market rate financial returns

3 There is increasing evidence that ESG leads to outperformance

5 Lessons learned and implementation best practices

Secular Trends Sustainable Growth

Growing Changing Improving

$1.5tn ESG AUM1

~3,000 ESG Funds Globally1

$271bn ESG equity fund flows in 20201

28% Increase in number of PRI signatories since 20192

70% Corporations highlighted ESG/governance developments in proxy letters to shareholders3

121% Increase in S&P companies citing ESG on earnings call in 20204

Screening Labeling Scoring

Environmental Social Governance

Engagement Proxy Voting Industry Affiliations

As stakeholders in businesses there is a vested interest in helping them improve

110 19% 0.7

Top Quartile Active ESG equity Funds Return Attribution

Q1 2020 2020 2016 - 2020 Average Active Return Attribution

The Number and Size of ESG Investments Have Increased Rapidly

The number and size of ESG ETFs have increased rapidly

EU Taxonomy Alignment 6 Environmental Objectives

MIFID II Suitability and Product Suitability assessment for sustainability

LEFT TAIL RIGHT TAIL

Toe in the water Deeper alignment Fully integrated

Consider integrating ESG into traditional asset management

Be wary of broad ESG data and apply the right tools

Consider ESG investing as a process, not a singular act

Wide Breadth Of Investment Dedicated Holistic

Podcasts and Video Interviews Website and Thought Leadership

Investment Strategy Pieces

Source: Goldman Sachs Asset Management. For illustrative purposes only.

© 2021 Goldman Sachs. All rights reserved.

Date of First Use: 5/27/2021. Compliance Code: 242252-OTU-1419117 / 242502-TMPL-05/2021-1419666

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