What drives stock prices up or down? According to Goldman Sachs, an increasingly determining factor in them is the level of effort a company has put into the energy transition. “Carbon is increasingly becoming a factor in stock selection and equity valuation, due to growing regulatory pressure and net zero investment strategies,” the leading bank said. Achieving net zero emissions by 2050 – a goal set out in the Paris Agreement – will require more investment in clean energy. According to the International Energy Agency, that means it will more than triple to about $4 trillion annually by 2030. Goldman suggests another way: rating companies based on energy efficiency their. Going forward, we also believe that improving energy efficiency will become an important topic for investors globally, given the various concerns of investors, Goldman analysts wrote. countries around energy security and energy scarcity”. “We believe investors will be looking to reward those who improve energy efficiency,” they added. Stock Selected Goldman has identified buy rated companies that are good at cutting down on their energy use and, accordingly, energy efficiency will play an important role in competitive positioning of these companies in the long run. Goldman has measured how companies have improved energy efficiency over their own history – on a three-year basis – and how well that decline compares to their peers. The bank divides stocks into two categories: high and low carbon intensive. The carbon-intensive sectors are those with relatively high levels of indirect emissions, including retail, transport infrastructure and consumer goods. Goldman says the company portfolio is suitable for investors looking to manage the total carbon exposure in their portfolio. Bank picks in this category include US mining company Newmont and US packing company Ball. Low carbon intensive sectors are businesses in which their emissions indirectly contribute the majority of their total carbon footprint. Goldman said these areas may have “best-in-class” performance in terms of energy cuts. These sectors include banking, real estate, semiconductors and tech hardware. Some of the bank’s picks in this category are Apple’s AAC supplier and US retailer Bath & Body Works.