A16 EZ RE THE WASHINGTON POST.WEDNESDAY, JANUARY 19 , 2022
Economy & Business
BANKING
Goldman Sachs
4Q profits down 13%
Goldman Sachs said its fourth-
quarter profits fell by 13 percent
from a year earlier, largely
because of the bank preparing to
pay out hefty pay packages to its
well-compensated employees.
It’s the latest sign that wages
are increasing sharply,
particularly on Wall Street. Most
of the major banks that have
reported their results have
indicated plans to pay employees
more in the upcoming year.
The New York-based
investment bank earned a profit
of $3.94 billion, or $10.81 a
share. That’s down from
$4.51 billion, or $12.08 a share,
in the same period a year earlier.
The results missed expectations
of analysts, who were looking for,
on average, a profit of $11.80 a
share, according to FactSet.
While Goldman was able to
grow revenue in the quarter,
those gains were more than
wiped out by the firm’s
compensation expenses. The
bank set aside $3.25 billion to
cover compensation and benefits
in the quarter, up 31 percent
from a year earlier.
Goldman typically has high
compensation expenses,
particularly in the last quarter of
the year, as the bank prepares to
pay out its annual bonuses to its
employees.
These bonuses can often be
multiple times an employee’s
salary, particularly for the firm’s
best-paid traders and investment
bankers.
But rising inflation, as well as
rising competition for employees
among the investment banks,
has pushed wages significantly
higher at the banks. Bloomberg
News reported late last week that
the firm was preparing to pay
out special one-time bonuses to
keep its most valuable
employees.
Pay at the firm is tied directly
to how well the overall company
does in the year, and this year
was incredibly good for
Goldman. The firm made
$21.64 billion in profits last year,
more than double what it earned
in 2020.
Dealmaking and trading
remained mostly strong lastquarter for the firm, helping to
drive profits. Investment
banking revenue was 45 percent
higher than it was the prior year.
Trading revenue was down a
modest 7 percent.
The firm’s return on equity —
a measurement of how well abank performs with the assets it
holds — was 23 percent last year,
more than double where it was a
year earlier.
Banks such as Goldman aim
for their return on equity to be
above 10 percent.
— Associated PressAUTOMAKERSGM plans to launch
online parts storeIn its drive to add revenue
from sales of software and
services, General Motors is
launching an online parts store
that will give GM vehicle owners
the ability to buy parts directly.
The automaker said Tuesday
this is just one of many new
digital offerings coming to car
buyers in the future. Those
include buying accessories, over-
the-air upgrades and
subscriptions digitally, as well as
the option to shop for, purchase
and finance electric vehicles
entirely online.
“ We are placing software and
digital services at the center of
every part of our business,” said
GM Chief Digital Officer Edward
Kummer.
GM’s new online parts
marketplace will make 45,
repair and maintenance parts,
such as oil filters, engine and
cabin air filters, batteries, brake
pads, accessory belts, cooling
hoses and windshield wiper
blades, available to Chevrolet,GMC, Buick and Cadillac owners.
A GM spokesman said the
automaker is not yet providing a
launch. It will give customers the
convenience of online shopping
and physical retail all in one
place, GM said. Customers can
choose home delivery or to pick
up their order at one of 800
participating GM dealers, where
staff is available to answer
questions.ALSO IN BUSINESS
YouTube is cutting its
investment in original
programming, ending a six-year
experiment with making
premium television shows under
veteran entertainment executive
Susanne Daniels. YouTube will
still fund original programming
for children and Black creators,
and it will honor existing
commitments, the company said
Tuesday in a blog post. But the
Alphabet-owned business is
redirecting other spending to
Shorts, a feature designed to
rival TikTok, and live shopping.
Daniels will leave YouTube on
March 1.— Bloomberg NewsDIGESTNHAC NGUYEN/AGENCE FRANCE-PRESSE/GETTY IMAGES
A worker at a garden in Hanoi pushes a cart carrying a kumquat
tree Tuesday, ahead of Lunar New Year celebrations. The holiday,
which this year falls on Feb. 1, is known in Vietnam at Tet and is also
celebrated in other nations including China and South Korea.2014 PHOTO BY MARK LENNIHAN/ASSOCIATED PRESSBlackRock chief executive Larry Fink’s annual letters to chief executives and shareholders are closely watched in the business world.
○
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DOWN 386.85, 2.6% ○S&P 500 4,577.
DOWN 85.74, 1.8% ○GOLD $1,812.
DOWN $4.10, 0.2% ○CRUDE OIL $85.
UP $1.61, 1.9% ○10-YEAR TREASURY YIELD 1.87%
UP 5.0%CURRENCIES
$1=114.60 Y EN, 0.88 EUROSBY STEVEN MUFSON
AND DOUGLAS MACMILLANBlackRock’s Larry Fink defend-
ed his firm’s push to hold compa-
nies accountable for environmen-
tal and social progress after con-
servative lawmakers claimed the
world’s largest asset manager is
using its financial might to impose
ideological beliefs on the corpo-
rate world.
“Stakeholder capitalism” — a
view that companies should adopt
policies that benefit their commu-
nities as well as their shareholders
— “is not woke,” Fink wrote in his
annual letter to chief executives
Monday. “It is capitalism.”
Fink’s remarks highlight a
growing debate over whether the
financial industry should be har-
nessed to reduce the risks of cli-
mate change. BlackRock, with
over $10 trillion in assets, has used
its clout to press for measures that
might slow climate change and
persuade companies to reach net-
zero emissions.
But the financial firm has
drawn criticism from environ-
mental activists, who say it should
cut ties with fossil fuel companies
that fail to reduce their emissions.
Some red-state lawmakers and
regulators, meanwhile, have said
the company h as abused its power,
and they have threatened to with-
hold public funds from Black-
Rock’s investment portfolios.
“If you don’t want to do busi-
ness with our industries, we are
not going to do business with you,”
said West Virginia Treasurer Riley
Moore (R), who on Monday an-
nounced the state would no longer
use BlackRock to manage its oper-
ating funds.
A similar fight is brewing in
Washington, where the Biden ad-
ministration has urged banking
and securities regulators to ex-
plore how they can influence com-
panies to address climate risks.
The Federal Reserve has taken
steps to focus on the threat climate
change poses to financial stability,
including nominating Sarah
Bloom Raskin, who has called for
curtailing the U.S. government’s
financial support of fossil fuel
companies, to be the top banking
regulator.
Last week, Raskin’s nomination
was criticized by Sen. Patrick J.
Toomey (R-Pa.), who said in a
statement that he had “serious
concerns that she would abuse the
Fed’s narrow statutory mandates
on monetary policy and banking
supervision to have the central
bank actively engaged in capital
allocation.” Raskin did not r e-
spond to a r equest for comment.
Lawrence G. Baxter, a law pro-
fessor a D uke University, said be-
cause of the systemic threat cli-
mate change poses to the financial
system, regulatory intervention
may be necessary to avoid a c atas-
trophe on the level of the afford-
able housing crisis.
“As we saw with the crisis of
2008, widespread damage to as-
sets can trigger a systemic col-
lapse,” Baxter said. “This is notpolitics; it is no less than regula-
tors doing their jobs.”
The Securities and Exchange
Commission has also identified
climate risks as a priority and
pledged to require companies to
be more transparent about their
social and environmental metrics.
The agency has said it plans to
propose new rules that would
mandate certain types of corpo-
rate disclosures, such as carbon
emissions, to help investors assess
climate risks across many differ-
ent businesses.
The BlackRock annual letters to
chief executives and shareholders
have become closely watched
since 2012, when Fink publicly
criticized his fellow CEOs for pur-
suing short-term strategies. He
also took aim at what he saw as
excessive dividends and share
buybacks.
In 2016, Fink wrote that “over
the long-term, environmental, so-
cial and governance (ESG) issues
— ranging from climate change to
diversity to board effectiveness —
have real and quantifiable finan-
cial impacts.”
A growing number of critics say
BlackRock’s own business falls
short of Fink’s lofty ideals. The
asset manager still invests in a
broad array of fossil fuels and oth-
er industries with high green-
house gas emissions. In Decem-
ber, BlackRock teamed up with a
Saudi asset manager to pay
$15.5 billion to buy and then lease
back pipelines to Saudi Aramco.
“Divesting from entire sectors
— or simply passin g carbon-inten-
sive assets from public markets to
private markets — will not get the
world to net zero,” Fink said in hisletter this week. “And BlackRock
does not pursue divestment from
oil and gas companies as a policy.”
Fink has cautioned that private
businesses could not be expected
to do too much. After the Novem-
ber climate summit in Glasgow,
Scotland, international climate
negotiators sought to persuade
businesses to take steps to slow
climate change.
“Capitalism has the power to
shape society and act as a power-
ful catalyst for change. But busi-
nesses can’t do this alone, and they
cannot be the climate police,” Fink
said. “That will not be a good
outcome for society. We need gov-
ernments to p rovide clear path-
ways and a c onsistent taxonomy
for sustainability policy, regula-
tion, and disclosure across mar-
kets.”
In his le tter this week, Fink said
BlackRock would continue to
press companies to pay attention
to climate change because it made
financial sense.
“We focus on sustainability not
because we’re environmentalists,
but because we are capitalists and
fiduciaries to our clients,” he said.
“That requires understanding
how companies are adjusting
their businesses for the massive
changes the economy is undergo-
ing.”
Fink said BlackRock would ask
companies to set short-, medium-
and long-term targets for green-
house gas reductions. “These tar-
gets, and the quality of plans to
meet them, are critical to the long-
term economic interests of your
shareholders,” he said.
[email protected]
[email protected]BlackRock’s Fink answers critics on
its e≠orts to shape c limate progress
Investment firm charts
green course but rejects
divestment policiesBY AARON GREGGExxonMobil, which has been
under pressure to slash its carbon
footprint, has committed to net-
zero greenhouse gas emissions
from its operations by 2050.
In a r eport released Tuesday,
the oil giant said it has identified
more than 150 “potential steps
and modifications” to reach that
goal, and that it already is work-
ing to limit methane that can leak
from damaged pipes and other
equipment, among other mea-
sures.
Investors, regulators and activ-
ists for years have been pressing
the energy industry, w hich gener-
ates hundreds of millions of
to nnes’ worth of greenhouse gas-
es, to transition toward cleaner
fuels. Such emissions are a major
contributor to climate change,
with rising temperatures tied to
more frequent and severe weath-
er events around the globe.
Climate experts called Exxon’s
goal a positive but limited step
forward for the oil giant, which
trails many of its industry rivals
on this front. BP and Shell, for
example, have more ambitious
reduction targets than Exxon,
and analysts say some of its Euro-
pean competitors spend more on
renewables.
And its net-zero goal does not
apply to the carbon dioxide re-
leased by everyday drivers and
other end-use customers, a cat-
egory that accounts for most of its
emissions.
“It’s great that they’re cleaning
up their operations... they
should have done that a long time
ago,” said Paasha Mahdavi, a po-
litical scientist at the University
of California at Santa Barbara
who studies extractive industries.
“But without a plan to pivot to-
wards something more sustain-
able, they’re not solving the actu-
al problem,” he said.
Exxon made about $200 billion
in the first nine months of 2021,
making it one of the world’s larg-
est oil companies by revenue. Its
production volumes in the Perm-
ian Basin of the Southwestern
United States averaged 500,
barrels per day in the most recent
quarter, according to a report.
In recent years, activist inves-
tors have pressured the company
to address its contribution to cli-
mate change. Last year they se-
cured three of the 12 seats on its
board, over chief executive Dar-
ren Woods’s objections.
On Tuesday, it pledged to
spend $15 billion by 2027 on
lower-emission business initia-
tives. It wants to invest in better
processes for detecting methane
leaks across its infrastructure,
and explore alternative hydro-
gen-based fuels. The company
said it will roll out detailed road
maps this year and next that
should crystallize its plans.
“We are developing compre-
hensive road maps to reduce
greenhouse gas emissions from
our operated assets around the
world, and where we are not the
operator, we are working with our
partners to achieve similar emis-
sion-r eduction results,” Woodssaid in a statement.
But Tuesday’s announcement
applies to a relatively small por-
tion of the company’s overall
emissions. The zero-emissions
goal applies only to scope 1 and
scope 2 emissions, which include
gases given off directly by the
company’s business operations,
such as through the burning of
excess fuel. The net-zero goal
does not involve scope 3 emis-
sions, which include everyday
drivers who fill up at the gas
station.
Exxon reported at least
650 million tonnes of emissions
from petroleum sales in 2020,
compared with “operational”
emissions of 112 million tonnes,
according to the Securities and
Exchange Commission. That
means about 85 percent of Ex-
xon’s 2020 emissions would not
be covered by the net-zero plan
announced Tuesday.
Excluding class 3 emissions
amounts to “pushing the blame
off of themselves and onto con-
sumers,” says Josh Eisenfeld, cor-
porate accountability communi-cations manager with the climate
advocacy group Earthworks.
“This is a commitment to con-
tinue using fossil fuels, which is
driving us further towards a cli-
mate catastrophe,” Eisenfeld said.
Some of Exxon’s global compet-
itors are years ahead of it. A
database compiled by the invest-
ment bank Raymond James
counts 19 oil companies that have
already committed to bringing
their operations to net zero by- Several smaller firms, in-
cluding the U.K.’s Tullow Oil and
Norway’s Equinor ASA, want to
reach that goal by 2030.
And several of Exxon’s peers
including BP, Occidental and
Shell have released net-zero
carbon dioxide targets that in-
clude class 3 emissions, according
to Raymond James.
Raymond James analyst Pavel
Molchanov said Exxon is trailing
its peers not only in how it sets
goals, but in the degree to which it
is investing in renewable energy
solutions.
Some of Exxon’s European
counterparts are investing more
than 20 percent of their capital
budgets in renewable and low-
carbon energy, Molchanov said.
For Exxon, that number is in the
single digits.
“[Exxon] is moving slowly, but
it’s better than nothing,” Molcha-
nov said.
[email protected]
ExxonMobil commits
to net-zero greenhouse
gas emissions by 2050
“It’s great that they’re
cleaning up their
operations... they
should have done that
a long time ago.”
Paasha Mahdavi,
political scientist
a t the University of California
a t Santa Barbara