Banks and other financial firms need to get creative to bring sustainable investments into the mainstream, said David Solomon, Goldman Sachs Group Inc.’s chief executive officer.
Conversations with clients about climate exposure have “amped up materially” over the last two years, but sustainable investments like green bonds are still “relatively niche,” Solomon said Wednesday at the Bloomberg Global Business Forum in New York. Such investments represent just 1% of capital markets activity, he said.
Solomon pointed to examples of creative products his bank has been involved with: a bond that’s cheaper for the borrower as long as it meets certain sustainability targets, and an equity portfolio that has a “carbon tilt” to slightly diverge from its benchmark index in an effort to lean on greener companies.
The event began just hours after the world’s most authoritative climate-science body, the Intergovernmental Panel on Climate Change, issued a dire report on how the declining state of the oceans and the world’s melting icy regions pose harm to human societies.
Solomon and other executives said they need help from policy makers.
“The finance world is moving much faster than the sovereign world,” Axa SA Chairman Denis Duverne said at the event. He said the International Monetary Fund should have climate metrics that help determine which countries receive investment.
Citigroup Inc. CEO Mike Corbat said that business executives appear more aligned on addressing climate change than political leaders, who are still divided despite a popular groundswell for action. Policy makers must use carrots as opposed to a “stick” approach that can normalize harmful actions, he said.
“We have got to start thinking outside the box and incentivizing people,” Corbat said. “So I don’t just like having the stick, because I think the stick leads to a rationality of behavior: ‘Fine, I can do that, I’ll pay for that, I’ll factor that in, my economics will cover that.”
Michael R. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.
— With assistance by Gwen Everett