Goldman Sachs sees Luxembourg funds as growth engine

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Goldman Sachs Asset Management wants to use more engagement to encourage companies, institutions and governments to improve sustainability reporting. “Especially on the fixed-income side, there is still a lot of room for improvement in terms of data quality and disclosure,” said Edith Siermann, chief investment officer of Goldman Sachs Asset Management b.v.

Siermann on Friday was appointed as CIO of GSAM b.v., meaning she will oversee investment activities from the The Hague office of Goldman Sachs Asset Management (GSAM), formerly NN IP, which the US firm acquired last year. In addition, she remains responsible for all of the asset manager’s sustainable fixed-income investments. The Netherlands is increasingly becoming GSAM’s «sustainability hub.» For example, the entire Green Bonds team resides in The Hague and Siermann’s colleague Valentijn van Nieuwenhuizen is global co-head Multi Asset Solutions and global head Sustainability for Public Investing.

IO: What is the added value of this governance role for you?

Siermann: “This role includes oversight of Goldman Sachs› Luxembourg funds, and they are an important growth engine for our business. I still think that’s a great addition. I will also oversee all fixed income and equity investors here in The Hague, as well as the local staff services - reporting to global investment leadership, housed in New York, London and The Hague. All in all, it’s a broader role, but at the same time I can continue to delve into sustainable fixed income, which has been my specialty for a number of years.”

IO: You were already responsible for that at NN IP. Did the approach you developed then fit with that of Goldman Sachs?

ES: “Goldman Sachs had also already built up a lot of expertise in SRI and, broadly speaking, the two approaches were certainly in line with each other. But of course they had to be fully integrated, and we’ve worked hard on that over the past year and a half. First taking stock of what the policies were on both sides, and then combining the best of both worlds.”

IO: What are the key components of this new approach?

ES: “Our rating methodology for fixed-income investments and our engagement policy. We see engagement as the means by which an investor can contribute to sustainability. That has a lot to do with our size in ESG integrated strategies. Also, since 2020, assets under management in our green, social and impact bond funds have increased almost fivefold, to more than 10 billion euros. Our green bond fund is the largest in the world at 2.3 billion euro. What I want to say: then you are big and leading enough to get in everywhere. And big enough to be heard. We want to use the influence that we can exert to encourage issuers to improve their reporting. Because of course there is still much room for improvement in terms of data quality and information provision. Especially on the fixed-income side, where, for example, issuers do not always have a stock exchange listing and therefore do not have to deal with the associated high reporting requirements.”

IO: The emphasis on engagement means that Goldman Sachs is focusing less on exclusion as a means to sustainability?

ES: “Many of our clients are keen to fund transition with their investments. That means that you not only encourage new initiatives that score well on esg factors, but you also want to encourage existing companies, which may not currently score so well in that respect, to improve. So that requires you to stay involved with such a company.”

IO: And the rating methodology?

ES: “Within fixed income, we use an entirely in-house developed method to rank investments on sustainability factors. With that method, we analyze companies, institutions as well as countries. We attach particular importance to also being able to identify the future sustainability factors. After all, investors are interested in expectations, in the future. So we look at what the sustainability performance is today, but also how it will develop: what plans does a company have, what is the objective, are interim goals being set, how strong is the commitment, how will the sustainability risks for that specific company develop? Et cetera. And then we also monitor how the company implements those plans.”

IO: Countries are also assessed in this way?

ES: “Certainly. By their climate plans and their implementation. But also by their vulnerability to climate risks. With regard to social factors and governance, we look at the political climate, freedom of expression, human rights violations. And also, for example, the extent to which there is a just transition: an energy transition in which social aspects are also taken into account.”

IO: What are the next steps Goldman Sachs wants to take when it comes to SRI?

ES: “I am very happy with the way Goldman Sachs is embracing the theme, and I also think we are doing well at the moment, but I am someone who does believe that you have to ask yourself every day how you can do better. Overall, I would say put even more resources into the research that is needed for this. Specifically, I would focus that on the topic of biodiversity. In that area, we will first build up more expertise so that we can then develop a policy on that.”