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Goldman Sachs Acss Invmt Grd Corp Bd ETF GIGB Sustainability

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Sustainability Analysis

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Sustainability Summary

 | Published as of .  Based on data as of

Goldman Sachs Acss Invmt Grd Corp Bd ETF may not appeal to sustainability-conscious investors.

The ESG risk of Goldman Sachs Acss Invmt Grd Corp Bd ETF's holdings is comparable to its peers in the US Fixed Income category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

Goldman Sachs Acss Invmt Grd Corp Bd ETF has an asset-weighted Carbon Risk Score of 8.8, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. Currently, the fund has 9.1% involvement in fossil fuels, which compares favorably with 12.2% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.

One potential issue for a sustainability-focused investor is that Goldman Sachs Acss Invmt Grd Corp Bd ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues. The fund has relatively high exposure (11.73%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager

 | Basic  

Goldman Sachs Asset Management has expanded and refined its sustainability-focused resources and practices since signing the United Nations-supported Principles for Responsible Investment in 2011. Its 2022 acquisition of sustainability-oriented NN Investment Partners also bears promise. However, the firm’s environmental, social, and governance integration efforts lack consistency, and rapid team growth has yet to drive an edge over peers, meriting a Morningstar ESG Commitment Level of Basic. In late 2022, GSAM settled charges from the U.S. Securities and Exchange Commission related to insufficient oversight in specific ESG products between 2017 and 2020. The firm bolstered its monitoring for ESG-focused products as a result, and analysts now adhere to a fundamental bottom-up research process for all securities in-scope. However, the firm only incorporates binding ESG criteria for custom portfolios instead of using a standardized, firmwide integration process, leaving adoption of ESG principles siloed within designated offerings. Despite these concerns, the firm has strengthened its ESG expertise and supporting resources. In 2022, GSAM finalized its acquisition of NN IP, which demonstrated a distinct alignment of ESG investment principles between the two firms and resulted in meaningful additions to both GSAM’s sustainability and stewardship teams. It now hosts over 160 ESG investment professionals and 11 dedicated stewardship team members. Still, the expansion has been rapid, and most stewardship professionals have fewer than four years’ experience on the team. GSAM also recently developed a proprietary ESG data tool that stands up to peers in its capacity to track research and company engagements across its equity and fixed-income strategies. A wide range of industry-leading research along with timely reporting on proxy voting and engagement activity make GSAM a relatively responsible active owner. The firm goes beyond regulatory requirements to publish comprehensive annual stewardship reports, along with a specific fixed-income engagement report where case studies are outlined in detail. Nonetheless, the firm has room to improve. GSAM reports its rationales for proxy-voting decisions inconsistently, and outside of a few scattered topics such as board diversity, the firm lacks a clear policy for escalating unsuccessful company engagements. Despite these gaps, the firm remains on par with its peers.