Lucas van Praag is the Global Head of Corporate Communications for Goldman Sachs. Founded in 1869, Goldman Sachs is one of the oldest and largest investment banks in the world. The firm recently introduced a new environmental initiative that requires its employees and clients to promote environmentally friendly practices. In this interview, van Praag explains the objectives of the initiative and the role safety, health and environmental (SH&E) professionals can play in its implementation.
Please provide a brief overview of Goldman Sachs and of your responsibilities as the Global Head of Corporate Communications.
Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services to a diversified client base, which includes corporations, financial institutions, governments and high net-worth individuals. The firm employs some 22,000 people, and it currently has a market capitalization of approximately $62.5 billion.
As the firm’s spokesperson, I represent the organization externally, and I am also responsible for the firm’s activities in media relations, brand marketing, charitable services and internal communications.
In November 2005, Goldman Sachs debuted a new environmental initiative that requires its employees to promote environmentally friendly practices and encourages its clients to protect the environment. What specific plans does this initiative include, and how will it achieve its intended goals?
The plan includes a number of specific elements. We want to use our expertise as market-makers to create more efficient markets for environmental products and services. And by actively trading in those markets, we act as a liquidity provider.
We have already begun to use our research capabilities to measure the impact of environmental risk and associated business opportunities and to determine how environmental risk can be mitigated within individual companies. We also want to better understand the impact that environmental issues have on our clients. We hope that this will help us to more effectively advise our clients and make us a better partner for them. And we will continue to support our conservation efforts and look for new opportunities to invest in renewable energy sources.
We plan to implement the initiative in its totality, and since its objectives are unambiguous, we will be able to clearly measure our success.
How do you believe this new initiative will affect safety, health and environmental (SH&E) professionals within your clients’ industries?
Most of our clients are already well aware of the importance of SH&E practices in their businesses, but we hope that SH&E professionals will be even more involved in clients’ due diligence work. We believe that as a result of this new initiative, SH&E professionals’ expertise will come to bear in very direct ways.
To further support its new environmental commitment, Goldman Sachs plans to invest one billion dollars in projects that will research alternative energy sources, and it will also increase its carbon trading activities. Why does Goldman Sachs feel that these measures will be particularly beneficial? What kind of results does Goldman Sachs hope to see?
Global warming is a reality, and its effects are becoming increasingly apparent. A considerable body of research supports scientists’ view that global warming is a significant threat to our planet. We believe that pursuing renewable energy sources is critical if we are to address the threat. Goldman Sachs has already invested a great deal in wind and solar power, and I confidently predict that we will surpass the one billion dollars that we have committed to spend.
At the moment, carbon trading is limited to Europe, but China and India are moving in the right direction, and we are seeing a ripple effect here in the United States.
Under the new environmental initiative, what methods will Goldman Sachs use to rate potential clients and to evaluate environmental risks before it provides funding?
We are already very discerning in our client selection process, and we do not apply a template approach to risk evaluation. We believe that many environmental risks can be identified through increased due diligence. In the past, our due diligence work would typically focus on clients’ financial and legal issues. For example, we would check with auditors to ensure that their views were current, but we did not ask clients if they had been on any NGO (non-governmental organization ) (NGO) watch lists for alleged illegal environmental activities. We have become much more sensitive to these sorts of issues.
Goldman Sachs believes that the way in which companies manage environmental and social risks may impact their corporate performance. How does Goldman Sachs help its clients to manage such risks?
We are not environmentalists, and we are not prescriptive—it is not our business to tell our clients how to manage environmental risks. Most of our clients are already aware of the risks, and we are always happy to identify outside environmental organizations that can provide expertise to those clients who want to resolve any environmental issues. However, if we determine that a client absolutely refuses to comply with good environmental practices, then we will not conduct business with them.
Does Goldman Sachs perform its risk assessments in-house or does it use outside contractors? Please elaborate.
We perform risk assessments internally, but we use outside organizations to better educate ourselves and to develop expertise in risk assessment.
With respect to “climate change” or the increasing levels of greenhouse gases in the earth’s atmosphere, Goldman Sachs believes that the following principles should guide environmental public policy development:
What role can SH&E professionals play in helping to achieve these principles?
It goes without saying that SH&E professionals must work proactively to ensure that their organizations comply with all legal standards, and they should also ensure that internal standards are appropriate and are consistently and effectively applied.
Is there anything that SH&E professionals can do specifically within a company to ensure that these principles are built into environmental public policy?
We think it is important for SH&E professionals to be actively involved in public policy debates. Sitting on the sidelines should not be acceptable. SH&E professionals should promote adherence to environmental risk management practices and continually look for cost-effective solutions. It is important to remember that a failure to recognize the risks that environmental issues can present to an organization’s reputation can have a significant impact on its long-term financial well-being.
Goldman Sachs’ own environmental policy includes the following objectives:
How will Goldman Sachs use its new environmental initiative to reach these objectives?
We have already begun to meet many of them. For instance, our Corporate Services department is working with vendors to ensure that we achieve goals with respect to the use of recycled products and energy-efficient equipment. We are well-advanced in the development of green building standards to be applied in the construction and renovation of our facilities, with Leadership in Energy and Environmental Design (LEED) Gold certification or other whole-building standards as the ultimate goal. Parenthetically, our new headquarters building, which is scheduled to open in lower Manhattan in 2008, will include state-of-the-art environmental features that we hope will represent a new benchmark for office design. And at Cogentrix, in addition to reporting greenhouse gas emissions , where feasible ,we will offer our plants as demonstration sites for innovative technology designed to reduce greenhouse gases.
How does Goldman Sachs determine which markets yield the most opportunity for creating environmental products and services?
We are setting up a Center for Environmental Markets. We hope to use the Center to pioneer research in partnership with academic, non-governmental and other organizations on specific projects. The plan is to work with different groups to develop solutions that can be applied to environmental issues in the capital markets.
Goldman Sachs and the Wildlife Conservation Society (WCS) have formed an alliance to protect 680,000 acres of land in Tierra del Fuego, Chile. What are the specific terms of this alliance, and how has it impacted the health of the land thus far?
We bought the land, which was originally part of a package of defaulted mortgages, because it is unique. A logging company owned the land, and we saw the default as an opportunity to preserve this extraordinary part of the world. We gave the land to WCS in trust for the people of Chile and then partnered with the Society. Their environmental expertise combined with our funding will ensure that the land remains in its natural state forever. Thanks to this alliance, the plants and wildlife in Tierra del Fuego continue to flourish.
What is Goldman Sachs’ view of SH&E investment?
We think that SH&E investment is fundamental in the effective operation of any industry. Companies that underinvest in this area potentially place themselves in peril.
In what ways can SH&E professionals promote social responsibility within corporations?
SH&E professionals should obviously perform their jobs as efficiently as possible, and they should also work to bring issues of social responsibility to the attention of senior management. We believe that social responsibility is more than a simple “box-checking” exercise. Organizations face issues that can seem relatively minor, but if these issues are not properly managed, they can escalate and have a major impact on an organization’s reputation and bottom line. Social responsibility and SH&E issues can directly affect an organization’s “license to operate.” Although banging this drum can be discouraging at times, SH&E professionals should never give up
Lucas van Praag is Goldman Sach’s spokesperson and Global Head of Corporate Communications. Based in Goldman Sach’s New York office, van Praag is responsible for media relations, internal communications, brand marketing and charitable services. He began his career with Goldman Sachs in 2000 as the Director of Corporate Affairs for Europe and then later subsequently assumed oversight responsibilities for corporate communications in Asia as well. He was appointed to his current role in November 2001.
From 1992 to 1999, van Praag was a partner at Brunswick, a financial public relations firm. Prior to that position, he served as the Managing Director of a publishing company in London, and he also ran a manufacturing business in the United Kingdom. He started his financial career as a banker with Bankers Trust Company in New York.
Van Praag graduated from the University of Durham in England with a joint honors degree in economics and economics history.