Sharing International Experience and China Practice Update with Kara Mangone

On Monday, July 18, 2022, Kara Mangone, Global Head of Climate Strategy at Goldman Sachs, delivered remarks at the US-China International Seminar Series on Transition Finance. Her speech is below.

Thank you for having me—it’s an honor to be here and to be discussing this very important topic. Thank you to Dr. Ma and Deborah Lehr for your leadership on climate finance.

I lead Climate Strategy for Goldman Sachs, where I have worked for the past almost 15 years to drive our internal sustainability strategy and advance our external engagement with investors, clients, policymakers, and other key stakeholders.

Our sustainability strategy is predicated on our perspective that, as a financial institution, the most significant impact we will have on energy transition and sustainable economic development is through work with our clients and by driving capital, ideas, and innovation to areas where they are needed most.

Of the $100-150 trillion of investment required globally over the next ~30 years to decarbonize, we estimate that upwards of $65 trillion is needed in Asia—representing over half of total demand.1

Together, we need to decarbonize the highest-emitting sectors, increase deployment of low carbon solutions including investment in new & innovative technologies (we have the technology to decarbonize ~50 percent of emissions, but the other half will come from technologies that are currently under development)2, and facilitate the early retirement of high-emitting assets today.

To accelerate our commercial efforts, we have made a $750 billion commitment to invest, finance and advise in sustainable finance by 2030, and we have made significant progress—almost $300 billion to date.3 And, we have developed our capabilities across divisions to support clients in the delivery of their decarbonization objectives globally.

In addition to engagement and commercial solutions offered for our client franchise in China and beyond, we have extensive research that has helped to inform where solutions are needed. For example, our Carbonomics Research Series’ “China Net Zero” report has provided a foundation to engage clients and inform our engagement strategy more broadly.4

  • China’s ambitious plans, including the pledge to achieve net-zero carbon by 2060 and reaching peak emissions before 2030, represent two thirds of the ~48 percent of global emissions from countries that have been pledged to net-zero.4
  • Looking back, China has also decarbonized faster per unit of GDP than any other country (with the exception of the UK). Since 2000, China has reduced the CO2 intensity of its economic output (CO2 emissions per GDP) by ~40 percent.4
  • Decarbonization in China has broader implications from a supply chain perspective than any other country, as exports contribute ~20 percent of Chinese CO2 emissions.4
  • Overall, our research highlights the tremendous opportunity that surrounds China’s decarbonization and how meaningful China’s role is in the global economy.

In addition to the private sector, public policy and partnership will play an important role in driving this forward. Bringing a broad set of stakeholders to the table will be critical to our success.

We’ve formed several commercially-focused partnerships across these key areas where we see unmet demand—accelerating the deployment of new technologies, collaborating on creative solutions for early retirement of fossil fuels (e.g., coal) and maintaining a critical focus on regions like South & Southeast Asia. I will highlight a few of them here:

In December 2021 we launched a Green Finance Working Group in partnership with the International Finance Forum and the Paulson Institute to develop private sector solutions that will accelerate green finance in China and globally.

  • This group is comprised of CEOs and senior level executives from private sector companies from the US, EU, and China who will play a critical role in decarbonization.
  • A key differentiator is that we are developing and implementing solutions that are focused on the private sector.
  • Our research estimates that $16 trillion in investment is required for China to reach net zero and the transition has the potential to create ~40 million new jobs by 2060—so the scale of the challenge is enormous, but so is the opportunity.4
  • Our goal is to put forth very concrete recommendations for the private sector—action oriented recommendations that the private sector can take on key challenges.

We know that accelerating commercial viability is a critical challenge particularly in Asia. So we partnered with Bloomberg and the Asian Development Bank to accelerate deployment of clean energy technologies in South & Southeast Asia, with an initial focus on India & Vietnam.

  • Together we launched the Climate Innovation Fund, a blended finance facility seeded with $25 million from Goldman & Bloomberg, that has the potential to catalyze up to $500 million in other commercial capital.5
  • The philanthropic commitment from both of our organizations will serve as a key enabler to address economic feasibility of projects that would’ve otherwise not received funding.
  • Our partners at the Asian Development Bank and bringing decades of experience in the region to select deals and deploy capital in the highest impact areas.

The topic of managed phaseout of high-emitting assets also falls squarely into this work of accelerating decarbonization through partnerships (published report alongside GFANZ members in June).6

  • Many of the companies we work with in developing or emerging markets in the world face a real challenge in that much of their economy relies on coal-fired power generation or other heavy- polluting assets to provide reliable, cheap energy sources for growing economies.
    • For example, as of today, 40 percent of China’s emissions come from coal fired power generation.4
  • While there is pressure to divest or disengage from high-emitting sectors, the transition will take longer and be costlier if we restrict capital to high-emitting sectors where we need to see robust transition plans and deployment of new low-carbon technologies.
  • Outlining a framework with clear guardrails that applies the right nuance for different regions and sectors, and metrics to measure progress against stated goals, can both provide credibility to these efforts and promote engagement.
  • We also need to think about energy access, community impacts, and inclusive transition when talking about transforming the hardest-to-abate sectors of these economies.

It has been a privilege to share our insights with you all today, and we look forward to continuing to play an active role in energy transition and decarbonization in China and beyond.

Thank you

1 “Climate Finance Markets and the Real Economy,” Global Financial Markets Association (2-Dec-2020)
2 “Net Zero by 2050” International Energy Agency (IEA) (2021)
3 “Progress Through Performance,” Goldman Sachs Sustainability Report 2021 (22-Apr-2022)
4 “Carbonomics: China Net Zero: The Clean Tech Revolution,” Goldman Sachs Equity Research (20-Jan-2021)
5 “Bloomberg Philanthropies and Goldman Sachs Deploy $25 Million to Advance Clean Energy Solutions in South and Southeast Asia,” Goldman Sachs Press Release (21-Sep-2021)
6 “The Managed Phaseout of High-emitting Assets,” Glasgow Financial Alliance for Net Zero (GFANZ) (Jun-2022)