By: Mark Smith, Global Head of Liquidity Products, Transaction Banking
Sustainability is a key firmwide initiative at Goldman Sachs. In 2019 we pledged to deploy $750 billion in sustainable finance activity over ten years and committed to helping our clients achieve their sustainability ambitions and promote more sustainable business practices. One example of a client solution we developed to help drive sustainable growth is the first product at Goldman Sachs Transaction Banking (TxB) with an environmental, social and governance (ESG) twist: an ESG-linked Demand Deposit Account.
The concept with this product is relatively straightforward: If a company meets its ESG targets, the yield on its deposit ratchets up.1 For Goldman Sachs, it’s another solution that aligns with the firm’s sustainability framework.
TxB has already delivered a series of innovative banking products, and the ESG-linked deposit represents another innovation. The linkage of ESG performance to a deposit yield is a market first. The underlying account is a demand deposit account, meaning that companies with these accounts will have access to daily liquidity, along with our full suite of products.
Treasurers’ ESG future
We believe that ESG financial products can play a crucial role in helping treasurers contribute to their organizations’ corporate social responsibility strategies. Investors are increasingly asking about the sustainability of a company’s operations, and the treasury operation should be helping to answer such demand. This makes sense as treasurers increasingly become involved in developing and improving sustainability data and in measuring the social impact of their organization on society.
Ultimately, treasury teams may be uniquely positioned as ambassadors for ESG issues because of their connections across various parts of the organization, which can be critical in delivering ESG-related targets. Indeed, in some cases, treasury may be the only function capable of aligning ESG goals across procurement, sales, finance and other parts of an organization.
TxB’s ESG-linked deposit product supports the corporate treasurer’s evolving role from liquidity funding and risk manager to business advisor—with a growing ESG advocacy task. Indeed, treasurers are increasingly using ESG finance to influence investors, banking partners and even suppliers. Enabling them with innovative working capital tools ultimately helps drive the ESG objective through the entire organization and into its wider stakeholder ecosystem.
Contributing to a more sustainable world may be less about grand gestures and more about the smaller, fundamental changes that ultimately come together to make a foundational shift. ESG-linked deposits are, in their own way, small pieces of the bigger change we need to make happen.
1 Based on pre-agreed targets and terms.
Source: goldmansachs.com
