1、Goldman Sachs does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making thei

2、r investment decision.For Reg AC certification and other important disclosures,see the Disclosure Appendix,or go to employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group,Inc.EQUITY?RESEARCH|January?,2024?|?:0?ESTDerek R.Bingham+

3、1 415 249-7435 Goldman Sachs&Co.LLCBrendan Corbett+1 415 249-7440 brendan.corbet t Goldman Sachs&Co.LLCRachit Aggarwal+1 212 934-7689 Goldman Sachs India SPLBrian Singer,CFA+1 212 902-8259 Goldman Sachs&Co.LLCCarly Davenport+1 212 357-1914 carly.davenport Goldman Sachs&Co.LLCEvan Tylenda,CFA+44 20 7

4、774-1153 evan.t Goldman Sachs Int ernat ionalADAPTATIONPhysical risk,Financial risk,OpportunityWe believe Adaptation proactive or reactive measures to mitigate impacts of rising temperatures will become a growing theme even if global temperature rise is limited to 1.5 degrees Celsius,the most bullis

5、h scenario in the Paris Agreement.We believe investors and corporates will focus on Adaptation through the lens of physical risk,?nancial risk,and revenue opportunity.In our report,we segment proactive and reactive drivers of Adaptation investment to fully address Adaptation challenges,$400 bn per y

6、ear of proactive investment would be required this decade in our view.We map Adaptation revenue streams and assess risk exposure to nine di?erent potential hazards.Dan Duggan,Ph.D+1 212 902-4726 Goldman Sachs&Co.LLCNoteNote:The following is a redacted version of the original report published January

7、 10,2024 44 pgs.AUTHORSBrian Singer,CFA+1(212)902-Goldman Sachs&Co.LLCBrendan Corbett+1(415)249-Goldman Sachs&Co.LLCRachit Aggarwal+1(212)934-Goldman Sachs India SPLDan Duggan,Ph.D.+1(212)902-Goldman Sachs&Co.LLCCarly Davenport+1(212)357-Goldman Sachs&Co.LLCDerek R.Bingham+1(415)249-Goldman Sachs&Co

8、.LLCEvan Tylenda,CFA+44(20)7774-Goldman Sachs InternationalAlex Scott,CFA+1(212)902-Goldman Sachs&Co.LLCJohn Miller+1(646)446-Goldman Sachs&Co.LLCMarly Reese+1(212)357-Goldman Sachs&Co.LLCGrace Chen+44 20 7774-Goldman Sachs InternationalIngrid Tierens,Ph.D.+1 212 357-Goldman Sachs&Co.LLCEmma Jones+6

9、1 2 9320-Goldman Sachs Australia Pty LtdMadeline Meyer+44 20 7774-Goldman Sachs InternationalVarsha Venugopal+1 415 393-Goldman Sachs&Co.LLCXavier Zhang+852 2978-Goldman Sachs(Asia)L.L.CPM Summary:Adaptation Opportunity and Risk 3 Adaptation investment and where investment is likely to be directed 8

10、 Measuring Physical Risk exposure:Nine areas of focus 17 How insurance companies are responding to physical risk 25 Why Adaptation will likely be a rising theme regardless of climate outcome 27 Adaptation through EU Taxonomy lens 30 How GS SUSTAIN can help 31 Disclosure Appendix 33 10 January 2024 2

11、Goldman SachsGS SUSTAINTable of Contents Applying our SDG tool 14 The following is a redacted version of GS Researchs report“GS SUSTAIN:Adaptation:Physical risk,Financial risk,Opportunity originally published January 10,2024(44 pages).All company references in this note are for illustrative purposes

12、 only and should not be interpreted as investment recommendations.PM Summary:Adaptation Opportunity and Risk Why Adaptation will likely be a rising theme regardless of climate outcome.We believe investor and corporate focus on Adaptation is beginning to increase,a function of the realization of pote

13、ntial risks/impacts/opportunities even in a bullish 1.5?Ctemperature rise scenario vs.pre-industrial levels or if temperature rise exceeds these levels.Since 1970,the world has seen an acceleration in temperature rise vs.the 1850-1900 average.We believe investors and corporates will in the near to m

14、edium term:Take increased measures to quantify physical risk.nIncrease investments towards Adaptation mitigation/solutions.nLook for new ways of gaining exposure to Adaptation solutions.nWe expect a rise in Adaptation investment both Proactive(investments made in advance of potential physical impact

15、s)and Reactive(investments made after physical impacts have manifested).We believe$400 bn of proactive investment per year this decade would be necessary to fully address Adaptation challenges.Capital availability and priorities of governments,corporates and consumers will be key to the level of ult

16、imate proactive investment,and investors may initially gravitate towards companies exposed to more reactive Adaptation investment pending greater transparency.In our report,we use physical risk modeling and historical catastrophe event damage intensity to assess risk exposure to nine potential hazar

17、ds.Potential Adaptation beneficiaries.We believe Adaptation investment can drive support for companies levered to:Reliability and Resiliency(Energy and Water)nInfrastructurenConsumption Efficiency/Circular EconomynBiodiversity ManagementnEducation/Re-TrainingnHealthnWe believe investors may initiall

18、y gravitate towards companies with favorable corporate returns seeing increased benefit from infrastructure:HVAC/air conditioning,buildings/building materials,water storage/treatment/reuse/desalination,resource efficiency hardware/software technology in industrial/energy/agriculture,solar power,on-t

19、he-margin electricity(including energy storage).10 January 2024 3Goldman SachsGS SUSTAINAdaptation represents investment and other measures taken proactively or reactively to address impacts of rising temperatures.We believe investors and corporates will focus on implications for physical risk,finan

20、cial risk and revenue opportunity.Exhibit 1:Adaptation warrants assessments of physical risk,financial risk and actions/investment/exposure towards solutions/mitigants Global temperatures vs.1850-1900 average(2023 data through November)and Adaptation hazards/solutions/mitigants 1.Clim a te S tre s s

21、 o rs2.H a z a rd s3.Ad a p ta tio n S o lu tio n s/M itig a n ts$400 bn a n n ua l p ro a ctive in ve s tm e n t wo uld be re q uire dIn cre a s e d glo ba l te m p e ra ture sCh a n gin g h yd ro lo gic p a tte rn sRis in g s e a le ve lsExtre m e h e a tWild fire sDro ugh tIn la n d flo o d in g/

22、Co a s ta l flo o d in g a n d e ro s io nP ublic h e a lth ris k sBio d ive rs ity lo s sIn fra s tructure Re s ilie n cyIn te gra te d Co a s ta l De fe n s eFo re s t-ba s e d a d a p ta tio nS us ta in a ble Fo o d P ro d uctio n (a griculture,cro p la n d m a n a ge m e n t,fis h e rie s/a q ua

23、 culture,live s to ck s ys te m s)Dis a s te r Ris k Ma n a ge m e n tMigra tio n,live lih o o d d ive rs ifica tio n,s o cia l s a fe ty n e ts,ris k s p re a d in gH e a lth s ys te m s a d a p ta tio ntInFSI?Source:IPCC,Berkeley Eart h,Goldman Sachs Global Invest ment Research10 January 2024 4Gol

24、dman SachsGS SUSTAINAdaptation tie-ins with other GS SUSTAI N themes:Will there be sufficient investment for them all?We see overlap between some Adaptation activities and other themes we have highlighted in our GS SUSTAIN research.Green Capex:Concerns on temperature rise will continue to provide ca

25、talyst for both mitigation(decarbonization)and Adaptation,with$6 tn ofninvestment needed this decade towards Net Zero by 2050,Infrastructure and Clean Water goals.Circular Economy:We believe that the pursuit of climate mitigation and climate adaptation solutions will be a catalyst for greater deploy

26、mentnof demand efficiency/Circular solutions,particularly with potential for a coming critical materials crunch.Biodiversity:We believe pursuit of climate mitigation and adaptation solutions will also be catalyst for greater focus on biodiversity strategiesnand solutions by government and corporates

27、,with$0.7-$1.0 tn per year of investment needed.Exhibit 2:I nvestments,and/or underinvestment,towards Decarbonization and Adaptation are likely to lead to increasing thematic overlap Solutions x Affordability,ROI,Risk Reduction =ValueDecDecarbonizarbonizationationNeeNeedsdsA Adapdapt tation ation Ne

28、Nee edsds?Water Transition?Health?Reliability?Infrastructure?ConsumptionEfficiency/CircularEconomy?BiodiversityManagement?Education/Re-Training?Energy TransitionSource:Goldman Sachs Global Invest ment Research10 January 2024 5Goldman SachsGS SUSTAINWe introduce a framework for measuring areal and po

29、pulation-weighted Physical Risk exposure and provide a lookback at historical per-capita catastrophe damages.We consider risks of nine potential hazards using model What could be prioritized if capital availability is limited?Higher interest rates,concerns regarding economic growth and a greater foc

30、us on prioritizing immediate investment needs vs.long-term needs are raising investor concern that investment needs towards Green Capex and broader sustainable goals may not be fully filled.Our own Green Capex analysis shows that the private sector is only on track for about a third of the overall g

31、lobal need even as there is significant spare capacity for publicly traded corporates to be investing more.In the absence of sufficient investment from governments,corporates and consumers towards Decarbonization and Proactive Adaptation,we believe the result could be an increase in Adaptation inves

32、tment towards Reactive verticals some of which will also be helpful towards Decarbonization.As we highlighted in our 2024 outlook,the risk of underinvestment will lead to greater focus on driving consumption efficiency and on preparation/reaction to temperature rise.We believe this will support not

33、just Adaptation(reactive and potentially proactive)but also Circular Economy,Affordability and Biodiversity.This Dawn of Thematic Convergence will likely push investors towards looking for companies/products levered to multiple themes that could benefit from both investment or consequences of underi

34、nvestment.Exhibit 3:We believe the private sector is on track for$0.9 tn of the incremental$2.8 tn Green Capex needed annually in the 2020s Components of incremental annual investment needed this decade to meet Net Zero,infrastructure and clean water goals,$trillion?Source:IEA,OECD,McKinsey&Company,

35、Fact Set,Goldman Sachs Global Invest ment Research10 January 2024 6Goldman SachsGS SUSTAINdeveloped to assess various risk thresholds for a given latitude/longitude:Hazards relating to Excess Water Hurricanes/Typhoons,Sea Level Rise,Non-Coastal Flooding.nHazards relating to Heat:Extreme Temperature,

36、Energy Consumption/Cooling Costs,Heat Stress.nHazards relating to Insufficient Water Water Stress,Wildfires.nHazards relating to Seismic activity Earthquakes.nWe measure Physical Risk based on exposure(low,medium,high,extremely high)to these nine hazards under an RCP 8.5 scenario(chosen as the most

37、severe physical risk scenario that would imply temperature rise of at least 3 degrees Celsius by 2100).In order to accommodate some adjustment for variation of average financial impact among different hazards,we provide a lookback at catastrophe damages from historical events as a proxy for communit

38、y damage per capita.Management engagement to identify risk and opportunity As focus on Adaptation rises,we believe increased engagement by both Sustainable and broader investors will result in managements being asked two key questions:How are you assessing and adapting to physical risk for your comp

39、any,customers and suppliers?1.How impactful to revenues and/or profits now and in the future are products that help customers execute their2.Adaptation strategies?We believe these questions will help assess both companies risk and opportunity to the Adaptation theme.10 January 2024 7Goldman SachsGS

40、SUSTAINAdaptation investment and where investment is likely to be directed We see opportunity for both Proactive and Reactive Adaptation investments.We see investment needs in Adaptation-related verticals that are:Proactive investments made in advance of physical impacts.nReactive those made after p

41、hysical impacts have manifested.nBoth some solutions will likely be deployed both proactively and reactively.nTo fully address Adaptation challenges on a proactive basis,around$400 billion of annual investment this decade would be required,in our view.The United Nations in its annual Adaptation Gap

42、Report(2023)estimates that annual financial needs for global adaptation for developing countries is$215-$387 bn this decade bounded by modeled cost of Adaptation at the low end and financing needs at the high end.Of the estimated Adaptation costs,more than 75%are for:(a)energy and transportation inf

43、rastructure resiliency;(b)coastal protection;and(c)river flood protection.The IPCC in its2022 climate change report on Impacts,Adaptation and Vulnerability highlights expectations that developing countryadaptation investment represents 75%of global needs in 2030(21%in 2050).Together this implies abo

44、ut$400 bn of annualproactive global Adaptation investment would be required this decade.We see potential for ultimate Adaptation investment required to rise above our base case.We believe Adaptation can be a material theme impacting incremental investment for companies exposed to Adaptation solution

45、s,even as:(a)investment requirements are more modest than Decarbonization;and(b)as discussed earlier,actual investment may not fully meet whats required.We believe the ultimate financial requirements to address Adaptation may be greater than$400 bn,as UN estimates do not explicitly take into account

46、 some more reactive impacts cooling demand,business/industry economic impact(supply chains,tourism,etc)or social effects(education,migration,etc).The UN also expects costs to increase substantially in future decades.10 January 2024 8Goldman SachsGS SUSTAINIn the absence of sufficient investment towa

47、rds Decarbonization and proactive Adaptation mitigants,greater Reactive Adaptation investment may result.As mentioned earlier,there is ample investment need towards Sustainable Development Goals from corporates,consumers and governments.Rising interest rates and greater focus on near-term returns vs

48、.long-term returns are contributing towards some reprioritization of capital investment plans even as policy stimulus like the Inflation Reduction Act is likely to be transformative.This could represent relative tailwind for more Reactive Adaptation investment,particularly if more immediate infrastr

49、ucture needs are prioritized over long-term needs.Damages from natural disasters were$275 bn in 2022.Swiss Re highlights that natural catastrophe costs in 2022 were$275 bn,with overall losses around$282 bn.Of this,about 55%was not insured.Regions that were majority insured included North America,Eur

50、ope and Australia/Oceania,while regions that were 20%or less insured included Asia,Latin America/Caribbean and Africa.Exhibit 4:We see proactive investment requirements to address Adaptation of$400 billion annually this decade,with about 75%for developing economies Midpoint of range of annual proact

51、ive investment needed in the 2020s to address Adaptation,billions of US dollars Exhibit 5:Bulk of Adaptation costs highlighted by UN are for energy and transportation I nfrastructure resiliency,coastal protection and river flood protection Percentage breakdown of estimated Adaptation costs by sector

52、/theme Exhibit 6:Gap needed for Adaptation financing within developing economies largest in APAC Climate Adaptation financing gap in developing economies,2021-30,percent of total?Source:Unit ed Nat ions,IPCC,Goldman Sachs Global Invest ment ResearchSource:Unit ed Nat ions(UN),Goldman Sachs Global In

53、vest ment ResearchSource:Unit ed Nat ions,Goldman Sachs Global Investment Research10 January 2024 9Goldman SachsGS SUSTAINWhere does investment need to be made?In its 2022 report,the IPCC highlights multiple key risks and related Adaptation options/climate responses.We group these into the following

54、 categories:Integrated Coastal Defense largely Proactive investment.Adaptation options include coastal defense/hardeningnand integrated coastal zone management.These involve physical and nature-based solutions seawalls,embankments,levees,wet-and dry-proofing buildings,mangrove stands,widening riverb

55、eds for flood retention,upstream forest restoration for upstream retention,beach nourishment,raising of structures and coastal roads,improveddrainage and amphibious building designs.Water Infrastructure and Development both Proactive and Reactive.Adaptation options for water include waternuse effici

56、ency,water resource management and sustainable urban water management.Solutions/mitigants wehighlight as more specifically Proactive include water storage,multi-purpose water reservoirs and dams,efficient watertransport and irrigation infrastructure and leakage mitigation.Solutions/mitigants we high

57、light as both Proactive&Reactive include liquid purification and filtration equipment/agents,water utilities,wastewater treatment,desalinationand water metering.Broader Infrastructure and Development both Proactive and Reactive.Adaptation options include resilient powernsystems,energy reliability,gr

58、een infrastructure/ecosystem services and sustainable land use/urban planning.Solutions/mitigants we highlight as more specifically Proactive include low-carbon/resilient building materials,productsExhibit 7:Natural disaster damages were$275 bn in 2022,with about 45%insured Percentage of natural dis

59、aster losses insured,2022 Exhibit 8:Latin America/Caribbean,Asia and Africa were least insured to catastrophes in 2022 as percent of total Percent of catastrophe losses insured,2022?Source:Swiss Re,Goldman Sachs Global Investment ResearchSource:Swiss Re,Goldman Sachs Global Investment Research10 Jan

60、uary 2024 10Goldman SachsGS SUSTAINand appliances,low carbon transportation solutions and parts providers,reliable power production and transmission,green metals mining&manufacturing,clean fuel producers,industrial automation,carbon capture technologies,waste-to-energy services and pipeline&energy s

61、torage services.Solutions/mitigants we highlight as more specifically Reactive include HVAC components and systems.Solutions/mitigants we highlight as both Proactive&Reactive include environmental consulting&GIS/GPS services,professional contractor suppliers,building design,maintenance,automation an

62、d engineering services,renewnable energy components and systems providers,electrical reliablility/safety systems and equipment and resilient infrastructure,industry&residential construction.Food Production largely Proactive.Adaptation options include improved cropland management and efficientnlivest

63、ock systems.This includes integrated soil management,reduced tillage,conservation agriculture,planting of stress-resistant or early-maturing crop varieties,mulching,crop diversification,improved livestock diets,enhanced animal health,breeding and manure management,grassland management,local food pro

64、duction integrated multi-trophic aquaculture,polyculture,aquaponics,mangrove-integrated culture and sustainable fishing practices.Solutions/mitigants we highlight as more specifically Reactive include soil remediation,veterinary services and food safety adjustments made across the animal feed,livest

65、ock production and meat product rendering value chain.Health Systems Adaptation&Innovation largely Reactive.Adaptation options include health and health systemsnsuch as providing access to safe water/sanitation,enhancing access to vaccinations,developing or strengtheningintegrated surveillance syste

66、ms and changing the timing/location of vector-control measures,temperature-controlledlow-income housing,health care clinics,place-specific health care/nutrition infrastructure/access and telemedicine.TheIPCC expects exacerbated respiratory diseases,allergies and cardiovascular disease.Forest-Based A

67、daptation largely Proactive.Adaptation options include forest-based solutions,sustainablenaquaculture/fisheries,agroforestry and biodiversity management/ecosystem connectivity.This includes sustainable forestmanagement and forest conservation.Migration,Risk Spreading,Livelihood Diversification large

68、ly Reactive.This includes education/training for thosenlooking to change their occupation,human migration and planned relocation/reset tlement,money transfer services,electronic transaction processing,and insurance.Disaster Risk Management both Proactive and Reactive.These include disaster risk mana

69、gement,and climatenservices(including early warning systems).Why Adaptation should bring a Water Transition.The pursuit of Climate Mitigation has opened significant investment and investment opportunity in the Energy Transition focused on providing producer and consumer decarbonization.We believe th

70、e pursuit of Climate Adaptation will drive investments and investment opportunity in the Water Transition as governments,corporates and consumers add infrastructure,storage,modernization and procurement and sanitation solutions to ensure water reliability/quality and mitigate the risks of excess wat

71、er from floods and insufficient water from droughts.We expect 10 January 2024 11Goldman SachsGS SUSTAINsolutions will be applied more regionally based on relative risks to heat,flood and/or drought.We see some overlap between handful of these activities and other themes we have highlighted in our GS

72、 SUSTAIN research,predominantly Biodiversity,Circular Economy and Green Capex.We believe that the pursuit of climate mitigation and climate adaptation solutions will be a catalyst for companies to consider deploying circular economy and biodiversity options.As we have highlighted,we see demand effic

73、iency solutions mitigating environmental footprint/intensity as increasingly an area of focus.As such,some products are exposed to multiple themes simultaneously solar/bat tery storage for Adaptation and the Decarbonization portion of Green Capex,Water Infrastructure for Adaptation and the water por

74、tion of Green Capex,etc.We believe this will have an impact across multiple sectors.We believe multiple sectors of the economy will play some role in providing adaptation solutions:Industrials via infrastructure/agriculture,natural resources companies via energy reliability/resilience,technology com

75、panies via demand optimization/automation software/hardware,health care via vaccination/vector-control,consumer via affordability/accessibility and responsiveness to geographical/demographic shifts,and financials via insurance evolution of pricing/providing risk sharing.10 January 2024 12Goldman Sac

76、hsGS SUSTAINExhibit 9:We see multiple business lines that are likely to be the recipient of greater Adaptation-related investment by governments,corporates and individuals Business lines levered to various Adaptation sub-themes;not all activities in the categories marked with an asterisk are Adaptat

77、ion-aligned;business lines divided into those Proactive(actions to mitigate future impact),Reactive(actions to respond to present impact),or Both*indicat es business act ivit y is not aut omat ically designat ed as adapt at ion-aligned Source:IPCC,Goldman Sachs Global Invest ment Research10 January

78、2024 13Goldman SachsGS SUSTAINApplying our SDG tool We believe increasingly Adaptation will be viewed by investors through the lens of revenue exposure to UN Sustainable Development Goals(SDGs).Given the SDGs are such a widely used framework for characterizing a broad range of different sustainabili

79、ty impacts,they provide a useful starting place for understanding where businesses may have exposure to relevant Adaptation activities.We do however,require some additional analysis for identifying alignment with some Adaptation activities,namely those which are focused on very specific adaptation o

80、ptions such as coastal hardening and disaster early warning systems.Several SDGs and sub-targets of those SDGs have clear links to adaptation activities necessary to mitigate the most acute physical impacts of climate change.Similar to our underlying SDG tool,we focus on identifying linkages where c

81、orporates can most credibly drive impact through their own products and services.Overall we find eight of our currently mapped SDGs to have clear linkages to adaptation activities(Exhibit 10).SDG mapping does not provide the entirety of coverage required to identify businesses aligned to various Ada

82、ptation activities,however.As such,we map additional relevant business activities outside the scope of our SDG tool to help fill in additional gaps.For example GPS manufacturing,systems and services providers are key technologies for corporates and governments alike to better understand their physic

83、al risk expose to various climate impacts.Similarly,resilient infrastructure developers or materials providers who do not operate in coastal areas would not be exposed to improving coastal hardening.10 January 2024 14Goldman SachsGS SUSTAINMapping results.This mapping process provided us with a univ

84、erse of 802 companies with over 20%aligned revenue exposure to one or more of the seven Adaptation sub-categories.Infrastructure&Development,was the clear adaptation option to which we map the most aligned companies,over 2,000 companies with some aligned revenue exposure.Where investors may initiall

85、y focus:Reactive I nfrastructure In our view,investors will likely see the most material short term capital flows towards more reactive adaptation solutions providers.This generally includes products and services whose incremental demand will be relatively inelastic and driven by a need to rebuild/r

86、ecover from extreme weather events.Disaster risk management solutions including backup power products,as well as resilient building materials and builders are likely to fall into this category.We also highlight increased use of HVAC for cooling to be more widely deployed in areas that have seen temp

87、erature rise.Where investors may focus next:Proactive I nfrastructure with confidence in capital deployment Among Proactive solutions,investors may focus initially on those where there is more near-term confidence in capital deployment.In particular,we highlight mitigants which overlap with decarbon

88、ization that are already being Exhibit 10:Where we see clear overlap between Adaptation and specific SDGs(sub-targets)mapped in our SUSTAI N SDG tool?Source:Unit ed Nat ions,IPCC,Goldman Sachs Global Invest ment Research10 January 2024 15Goldman SachsGS SUSTAINincentivized by legislation such as the

89、 Inflation Reduction Act that include solar,low carbon fuels,carbon capture and energy storage.These products can serve as critical technologies in reducing the resiliency of the grid and/or the carbon footprint of many industries.Where investors could focus longer term:Human I mpacts Adaptation sol

90、utions focused on addressing some of the more socially oriented physical impacts of climate change(i.e.,health stresses and displacement)may take longer in our view to receive investor appreciation pending greater confidence in impact for exposed companies from investment deployment.These solutions

91、include companies helping to improve the efficiency of healthcare delivery/access,treatments focused on indication categories likely to be most acutely impacted by rising temperatures(i.e.,cardiovascular and respiratory conditions),and those who provide access to education,professional and financial

92、 services for populations displaced by climate change.10 January 2024 16Goldman SachsGS SUSTAINMeasuring Physical Risk exposure:Nine areas of focus Feedback from investors and corporates suggests a rising focus on physical risk and greater engagement among investors and managements(regardless of whe

93、ther investors have a Sustainable mandate or not)in response to recent events.We believe investors are looking for greater granularity on how exposed assets,companies or regions are to various physical risk scenarios.In this report,we consider nine:Wildfires,Hurricanes&Typhoons,Seismic Events,Sea Le

94、vel Rise/Coastal Floods,Non-Coastal Floods,Frequency of Extreme Temperature,Water Stress,Heat Stress,Energy Consumption.To look at this more granularly,we deploy a physical risk model that considers the areal risk assessment to these nine events.The model we deploy assesses risk using 2022 as a base

95、line year.For seismic and hurricanes,historical events are used to assess geographical risk without assuming any changes by 2050.For other events,the model estimates risk for 2050 inclusive of changing climate conditions based on historical events.We can look at a given area based on geographical co

96、ordinates(latitude/longitude globally,zip code in the US,etc).The model assesses risk using an RCP 8.5 scenario,which implies a 3+degree temperature rise by 2100.For each hazard we assess rungs of risk(i.e.,low,medium,high,extremely high)based on levels consistent with industry practice or modeler a

97、ssumptions.Ultimately,investors are looking to physical risk assessments to:(a)better understand potential financial risk to community,customers or company;and(b)to potentially consider investment needed for Adaptation.We believe financial risk from physical risk will depend on intensity of event,ge

98、ographical footprint and concentration and resiliency of assets/people.Discussions with investors indicate there is not a consensus way of pricing financial risk from physical risk into equities but that there are implications to some combination of earnings/cash flow multiple or discount rate.We be

99、lieve a full understanding of the resiliency and replacement cost of a companys assets are optimal to best estimate individual company risk.However,we do not have full confidence at present in data availability/efficacy for this level of granularity to be fully applied.For now,we assess physical ris

100、k based on operating areas driven by the percentage of area or population exposed to various levels of risk to nine hazards.We estimate the total cost of damage from various events based on the parameters provided for each rung of risk.We use historical data from EM-DATs global disaster database whe

101、re there is sufficient information on event size,cost and population affected.Based on weighted averages,we estimate Community Damages Per Capita for Extremely High,High and Medium Risk(we assume no points for Low Risk)rungs for Hurricanes,Wildfires,Non-Coastal Floods,Droughts and Earthquakes.For Ex

102、tremely High Risk,per-capita damage assumptions range from$2.3K for Water Stress to$1.1 million for Sea Level Rise/Coastal Floods based on parameters discussed above.We apply historical per-capita drought damages to Water Stress and historical per-capita non-coastal flood damages ton10 January 2024

103、17Goldman SachsGS SUSTAINSea Level Rise(similar to cost of Coastal Floods where data is more limited).For Heat Stress,Extreme Temperatures and Energy Consumption(cooling)where historical data is more limited we usenthe average per-capita costs associated with droughts and wildfires.For Sea Level Ris

104、e we apply historical damages per-capita from 1-in-100 year events to 10%of population based on anview that the impact within a given area may be more limited from Sea Level Rise to those more directly proximate tothe coast.Exhibit 11,Exhibit 12 and Exhibit 13 show how the United States,China and In

105、dia are potentially exposed to the various rungs of physical risk by sub-area(counties in the US,counties in China and taluks in India)as defined above.GS Dat a Wor ks lever ages alt er nat ive dat a sour ces and advanced analysis t echniques t o cr eat e unique dat a-dr iven insight s acr oss Globa

106、l Invest ment Resear ch.GS Dat a Wor ks analysis pr ovided by Dan Duggan,Ph.D and Dhr uv Goyal.10 January 2024 18Goldman SachsGS SUSTAINExhibit 11:Physical Risk:How the US Lower 48 could be exposed Potential exposure to Sea Level Rise(coastal floods),Non-Coastal floods,Energy Demand rise,Extreme Tem

107、perature,Heat Stress,Water Stress,and Wildfires in RCP 8.5 scenario,2050;risk exposure for Hurricanes and Earthquakes Source:Goldman Sachs,Goldman Sachs Global Invest ment Research10 January 2024 19Goldman SachsGS SUSTAINExhibit 12:Physical Risk:How China could be exposed Potential exposure to Sea L

108、evel Rise(coastal floods),Non-Coastal floods,Energy Demand rise,Extreme Temperature,Heat Stress,Water Stress,and Wildfires in RCP 8.5 scenario,2050;risk exposure for Hurricanes and Earthquakes Source:Goldman Sachs,Goldman Sachs Global Invest ment Research10 January 202420 Goldman SachsGS SUSTAINExhi

109、bit 13:Physical Risk:How I ndia could be exposed Potential exposure to Sea Level Rise(coastal floods),Non-Coastal floods,Energy Demand rise,Extreme Temperature,Heat Stress,Water Stress,and Wildfires in RCP 8.5 scenario,2050;risk exposure for Hurricanes and Earthquakes Source:Goldman Sachs,Goldman Sa

110、chs Global Invest ment Research10 January 2024 21Goldman SachsGS SUSTAINKey assumptions for assessing risk Wildfires.To measure this,we consider the areal extent of wildfire risk,with risk rungs based on National Wildfire1.Coordinating Group criteria.We define 5,000+acres as Extremely High Risk,1,00

111、0-5,000 acres as High Risk,100-1,000acres as Medium Risk and 0-100 acres as Low Risk.To measure community financial risk,we look at the historicaldamages per acre and damages per capita of past wildfires within these ranges and use the midpoints for Medium/Highand 100,000 acres for Extremely High ba

112、sed on the historical damages per-capita per-acre for wildfires 100,000 acres.Hurricanes&Typhoons.To measure this,we consider the maximum wind speed(in knots)of a tropical cyclone,based2.Exhibit 14:Historical damages per-capita have varied across key hazards Per-capita damages from rising temperatur

113、e-related hazards and seismic activity based on historical global events applied to risk rung parameters highlighted earlier in the report?Source:EM-DAT,CRED,UCLouvain,Goldman Sachs Global Invest ment Research10 January 2024 22Goldman SachsGS SUSTAINin part on NOAA criteria.We define 136+knots as Ex

114、tremely High Risk,96-136 as High Risk,64-96 as Medium Risk and 0-64 as Low Risk.To measure community financial risk,we look at the historical damages per knot and damages percapita of past tropical cyclones within these ranges and use the midpoints for Medium/High and 150 knots for ExtremelyHigh.Sei

115、smic Events.To measure this,we consider the risk of earthquakes of various levels of intensity based on the3.Modified Mercalli Intensity(MMI)and USGS criteria.We define MMI in the 9s or greater as Extremely High Risk,7s-8sas High Risk,5s-6s as Medium Risk and 1s-4s as Low Risk.To measure community f

116、inancial risk,we look at thehistorical damages per level of MMI and costs per capita of past earthquakes within these ranges and use MMI of 6/8 forMedium/High and 9 for Extremely High.Sea Level Rise/Coastal Floods.To measure this,we consider the rarity of a coastal flooding event via the risk an are

117、a4.could see 1-in-100-year flooding events.We define 50+times in a year as Extremely High Risk,10-50 times as High Risk,1-10 times as Medium Risk and 0-1 times as Low Risk.To measure community financial risk,we look at historicaldamages for flooding events per capita and apply damages from the top 4

118、%of non-coastal floods that affected at least100,000 people(the result is similar to the more limited data for damage from the most expensive coastal floods).Wethen assume that an event will affect 10%of population in given area based on expectations for more concentratedimpact on the coast.For Medi

119、um/High/Extremely High,we assume 6/30/50 events in a year.Non-coastal Floods.To measure this,we consider the rarity of an inland flooding event and risk to a given area.We5.define 1-in-100-year event as Extremely High Risk,1-in-20 to 1-in-100 as High Risk,1-in-10 to 1-in-20 as Medium Risk andless se

120、vere than 1-in-10 as Low Risk.To measure community financial risk,we look at the historical damages per acreand damages per capita of past inland floods.We apply damages per capita we believe are applicable to the parametersabove based on historical distribution of per-capita cost and events.Water S

121、tress.To measure this,we consider the extent to which an area is deprived of normal water supply,with risk6.rungs based on UN FAO criteria.We define Insufficient supply(100%loss)as Extremely High Risk,75%-100%loss asHigh Risk,20%-75%loss as Medium Risk and 20%loss as Low Risk.To measure community fi

122、nancial risk,as a proxyfor damages associated with various levels of water insufficiency,we look at the historical costs per capita associatedwith historical droughts affecting at least 500 people,with top 25%for Extremely High Risk,50%-75%for High Risk and25%-50%for Medium Risk.Frequency of Extreme

123、 Temperature.To measure this,we consider the number of consecutive days temperatures reach7.95F.We define 60+as Extremely High Risk,20-60 as High Risk,1-20 as Medium Risk and 0 as Low Risk.To measurecommunity financial risk,due to limited data we apply the damages per capita for a given risk rung ba

124、sed on the averageof wildfires and droughts.As more event-specific data emerges on damages and population affected based on theseparameters,we will look to update.10 January 2024 23Goldman SachsGS SUSTAINHeat Stress.To measure this,we consider the risk of heat stress to the human body using the WetB

125、ulb Globe8.Temperature(WBGT),with risk rungs based in part on OSHA criteria.This takes into account multiple atmosphericvariables,including temperature,humidity,wind speed,sun angle,and cloud cover with a color coded measurement ofrisk ranges.We define at least 1 day in the Black Zone as Extremely H

126、igh Risk and any number of days in the Red Zonebut no risk to the Black Zone as High Risk.We do not assess Medium or Low Risk.To measure community financial risk,due to limited data of damages from zones of the WBGT,we apply the damages per-capita for a given risk rung based onthe average of wildfir

127、es and droughts.As more event-specific data emerges on damages and population affected basedon these parameters,we will look to update.Energy Consumption.To measure this,we consider the extent to which an area could see an increase in energy9.consumption deployed for cooling.We define 50%+increase a

128、s Extremely High Risk,20%-50%increase as High Risk,7,000 companies includes our recentlyintroduced Product Alignment framework,based on the SDGs,EU Taxonomy and GS analyst views,and can helpinvestors cast a wider net in the search for impact ideas aligned to less obvious sustainability themes.Existi

129、ng pillarsdetail performance around sector-specific environmental and social operational metrics,governance,and controversies.Forward-looking estimates.Looking ahead,we believe investment performance will be more driven by future changenand have taken our steps toward incorporating forward-looking e

130、stimates in our proprietary industry analyst inputs,whichnow include sustainable product revenue and capex in select industries.We also have analyst estimates for Scope 1 and2 greenhouse gas emissions for a smaller segment of companies in 10 sectors.EU Taxonomy revenue alignment.We see the EU Taxono

131、my as one of the most seminal regulatory developmentsndriving standardization in reporting for corporates/asset managers.Our EU Taxonomy alignment tool maps companyrevenues to Taxonomy-defined activities to estimate potential Taxonomy-eligible and aligned revenue based on technicalscreening checks w

132、here data exist,and“Do No Significant Harm”and“Minimum Social Safeguards”criteria.SDG revenue alignment.The UN Sustainable Development Goals(SDGs)have emerged as one of the most commonlynused frameworks for taxonomizing impact across a broad set of sustainability challenges.Our SDG alignment toolemp

133、loys granular revenue data,GS analyst inputs and other company metadata to map alignment,exposure andmisalignment to ten of the SDGs we deem to be most investable.Sustainable fund ownership.Aggregating fund holdings across a universe of 3,000 Sustainable funds,we analyze thisnpool of Sustainable inv

134、esting assets to bet ter understand trends in Sustainable fund ownership at both the sector andcompany level.The full dataset provides absolute and momentum ESG ownership detail for well over 10,000 securities.ESG fund flows,valuations and performance.Our ESG Tracker series analyzes the aforemention

135、ed ESG fund universento gauge ESG fund flow momentum and sizing relative to the broader market,breaking out differences by strategy,fundtype and fund style.The tracker also examines valuation and performance across categories.10 January 2024 31Goldman SachsGS SUSTAINThe aut hor s would like t o t ha

136、nk Dhr uv Goyal for his cont r ibut ion t o t his r epor t.Exhibit 20:How GS SUSTAI N can help:Data tools,themes,trends and ideas Industry TrendsESG IntegrationThe?helps investors navigate the current ESG landscape,fusing data tools and scoring metrics with the ESG investing life cycleImplications f

137、or investors from the EU Green Taxonomy,SFDR,CSRD and ESG regulatory efforts in the US and Asia PacificRegulationESG fund flows,top ESG fund holdings and where we see crowding of over/underweight positions,Exclusion vs.Engagement,ESG shift From Aspiration to ActionCapital Flows&TrendsImpact across t

138、he supply chain from$6.0 trillion in annual capex needed this decade to support Net Zero,Infrastructure,and Clean Water goals;policy tailwind from the US Inflation Reduction ActGreen CapexImplications of rising temperatures on physical risk,financial risk,needed investment and investment beneficiari

139、es;framework for assessing physical/community financial risk to nine hazardsAdaptationIdentifying transformations via forward-looking estimates on Green Revenue,Green Capex and Greenhouse Gas Emissions by company by year;Avoided Emissions framework at sector levelImprovers&GreenablersDataToolsInputs

140、 from sector analysts 7,000companies coveredTeam with global footprintESG Performance?Environmental&Social?Governance?Product Alignment?ControversiesESG Fund HoldingsRelative and Absolute WeightsFundamentals?Corporate returns?Reinvestment rate?LeverageRevenue Exposure?UN SustainableDevelopment Goals

141、?EU TaxonomyForward-looking estimates?Green Revenue?Green Capex?EmissionsStockIdeasClimate Transition Tool?Transparency score?Performance scoreInvestment ThemesBeneficiaries from rising deployment of energy/waste/food efficiency solutions to reduce resource consumption;framework for measuring adopte

142、rs and enablersCircular EconomyFramework to help corporates/investors with their Net Zero objectives;corporate Climate Transition Tool measures transition plan transparency and performanceNet ZeroSolutions providers for and revenue beneficiaries of biodiversity conservation and risk management leade

143、rs and improversBiodiversitySpotlight businesses contributing to the expansion of access and increased affordability in SDG-aligned Social categories,often with a dual environmental benefitAffordability&AccessibilitySource:Goldman Sachs Global Invest ment Research10 January 2024 32Goldman SachsGS SU

144、STAINDisclosure Appendix Reg AC We,Brian Singer,CFA,Brendan Corbet t,Rachit Aggarwal,Carly Davenport,Derek R.Bingham,Evan Tylenda,CFA,Alex Scot t,CFA,John Miller,Marly Reese,Grace Chen,Emma Jones,Madeline Meyer,Varsha Venugopal and Xavier Zhang,hereby certify that all of the views expressed in this

145、report accurately reflect our personal views about the subject company or companies and its or their securities.We also certify that no part of our compensation was,is or will be,directly or indirectly,related to the specific recommendations or views expressed in this report.We,Dan Duggan,Ph.D.and I

146、ngrid Tierens,Ph.D.,hereby certify that all of the views expressed in this report accurately reflect our personal views,which have not been influenced by considerations of the firms business or client relationships.Unless otherwise stated,the individuals listed on the cover page of this report are a

147、nalysts in Goldman Sachs Global Investment Research division.GS Factor Profile The Goldman Sachs Factor Profile provides investment context for a stock by comparing key at tributes to the market(i.e.our coverage universe)and its sector peers.The four key at tributes depicted are:Growth,Financial Ret

148、urns,Multiple(e.g.valuation)and Integrated(a composite of Growth,Financial Returns and Multiple).Growth,Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock.The normalized ranks for the metrics are then averaged and converted into percentiles fo

149、r the relevant at tribute.The precise calculation of each metric may vary depending on the fiscal year,industry and region,but the standard approach is as follows:Growth is based on a stocks forward-looking sales growth,EBITDA growth and EPS growth(for financial stocks,only EPS and sales growth),wit

150、h a higher percentile indicating a higher growth company.Financial Returns is based on a stocks forward-looking ROE,ROCE and CROCI(for financial stocks,only ROE),with a higher percentile indicating a company with higher financial returns.Multiple is based on a stocks forward-looking P/E,P/B,price/di

151、vidend(P/D),EV/EBITDA,EV/FCF and EV/Debt Adjusted Cash Flow(DACF)(for financial stocks,only P/E,P/B and P/D),with a higher percentile indicating a stock trading at a higher multiple.The Integrated percentile is calculated as the average of the Growth percentile,Financial Returns percentile and(100%-

152、Multiple percentile).Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future.Growth uses inputs for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future(on a per-

153、share basis for all metrics).For a more detailed description of how we calculate the GS Factor Profile,please contact your GS representative.M&A Rank Across our global coverage,we examine stocks using an M&A framework,considering both qualitative factors and quantitative factors(which may vary acros

154、s sectors and regions)to incorporate the potential that certain companies could be acquired.We then assign a M&A rank as a means of scoring companies under our rated coverage from 1 to 3,with 1 representing high(30%-50%)probability of the company becoming an acquisition target,2 representing medium(

155、15%-30%)probability and 3 representing low(0%-15%)probability.For companies ranked 1 or 2,in line with our standard departmental guidelines we incorporate an M&A component into our target price.M&A rank of 3 is considered immaterial and therefore does not factor into our price target,and may or may

156、not be discussed in research.Quantum Quantum is Goldman Sachs proprietary database providing access to detailed financial statement histories,forecasts and ratios.It can be used for in-depth analysis of a single company,or to make comparisons between companies in different sectors and markets.Disclo

157、sures Distribution of ratings/investment banking relationships Goldman Sachs Investment Research global Equity coverage universe As of January 1,2024,Goldman Sachs Global Investment Research had investment ratings on 2,961 equity securities.Goldman Sachs assigns stocks as Buys and Sells on various r

158、egional Investment Lists;stocks not so assigned are deemed Neutral.Such assignments equate to Buy,Hold and Sell for the purposes of the above disclosure required by the FINRA Rules.See Ratings,Coverage universe and related definitions below.The Investment Banking Relationships chart reflects the per

159、centage of subject companies within each rating category for whom Goldman Sachs has provided investment banking services within the previous twelve months.Rating DistributionInvestment Banking RelationshipsBuyHoldSellBuyHoldSellGlobal48%35%17%62%55%43%10 January 2024 33Goldman SachsRegulatory disclo

160、sures Disclosures required by United States laws and regulations See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report:manager or co-manager in a pending transaction;1%or other ownership;compensation for certain ser

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162、owing are additional required disclosures:Ownership and material conflicts of interest:Goldman Sachs policy prohibits its analysts,professionals reporting to analysts and members of their households from owning securities of any company in the analysts area of coverage.Analyst compensation:Analysts

163、are paid in part based on the profitability of Goldman Sachs,which includes investment banking revenues.Analyst as officer or director:Goldman Sachs policy generally prohibits its analysts,persons reporting to analysts or members of their households from serving as an officer,director or advisor of

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193、e Japanese Securities Finance Company.Ratings,coverage universe and related definitions Buy(B),Neutral(N),Sell(S)Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists.Being assigned a Buy or Sell on an Investment List is determined by a stocks total return pot

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195、m Buy rated stocks on the respective regions Investment lists and represent investment recommendations focused on the size of the total return potential and/or the likelihood of the realization of the return across their respective areas of coverage.The addition or removal of stocks from such Convic

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218、e in the analysts judgment.10 January 2024 35Goldman SachsGoldman Sachs conducts a global full-service,integrated investment banking,investment management,and brokerage business.We have investment banking and other business relationships with a substantial percentage of the companies covered by Glob

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