Goldman Sachs – Climate Transition Tool 2.0

Goldman Sachs has updated its Climate Transition Tool, which is used to measure corporate climate progress, to incorporate new data sources and improve assessment methods. The tool is applied to over 7,000 publicly-traded companies and focuses on the three Ps: Plan, Path, and Performance. The update includes data on targets in the Oil & Gas sector, sustainable and coal lending in the Financials sector, climate policy engagement in the Oil & Gas and Financials sectors, and considerations for 'Just Transition' in select sectors. Methodology and metric updates have also been made to enhance assessment and distribution across all companies. The company found that companies with strong Climate Transition Transparency/Performance have a clear advantage in terms of ESG fund ownership. Top-performing companies are significantly overweighted in ESG funds compared to benchmark weighting, while bottom-performing companies are underweighted. Valuation signals also suggest that top-performing companies have higher sector relative EV/EBITDA premiums compared to bottom-performing companies. Interestingly, this correlation does not hold for transparency, indicating that performance is more important than just disclosure.