Goldman Sachs GS SUSTAIN: ESG of the Future Steel Our analysis comprises 36 Steel producers, globally. We include 12 Steel companies in Americas, 8 in Europe and 16 in Asia Pacific. We received GHG emissions estimates from our analysts for 11 of the 36 companies. We derive emissions intensity for the Steel sector dividing amount of Scope 1+2 CO2-eq emitted (in tons) by steel production (in tons), consistent with our colleagues Carbonomics work. Scope 1+2 emissions intensities in the Steel sector are estimated to decline by 8% in 2025E vs. 2019 levels. Our analysis suggests Scope 1+2 GHG emissions are estimated on the rise YoY in 2020 and 2021E (+1%-4%) — potentially due to COVID-related disruptions in operational efficiencies — but from 2021E throughout 2025E are projected on the decline (2%-4% YoY). Please see Exhibit 23 for more details. We note the main driver behind the decline in overall Scope 1+2 emissions intensities is steel production growing at a 1% CAGR between 2019-2025E, while absolute Scope 1+2 emissions are estimated to decrease at a slightly slower pace vs. 2019 levels (see Exhibit 24). Why we believe this will matter for investors. We expect steel to be a key material on path to Net Zero, Clean Water and Infrastructure goals, transversal across the vast majority of verticals in the Green Capex mosaic. Decarbonizing the Steel sector likely involves higher penetration of Electric Arc Furnace (EAF) technologies, as the industry faces increasing scrutiny over its environmental footprint, and EAFs are among the least carbon-intensive technologies to produce steel. As described in our ESG of the Future report, our analysts estimates point towards a percentage of steel from EAF to grow to 32% of the total in 2025E (vs. 28% in 2020) among covered companies — though, we note the change is driven by a handful of companies for which estimates indicate rising EAF mix, while for the majority steel production from EAF either stays very low or very high. We note that Electrification-related investments — among which EAF capex — would need to amount to more than $300 bn annually in the 2020s, on path to Net Zero targets. Investment Implications. The Steel sector is currently 41% underweight in ESG funds vs. respective benchmarks (based on SUSTAIN classification, as reported in Exhibit 18). Given the criticality of steel on path to Net Zero, Clean Water and Infrastructure goals, we believe there is room for further appreciation of companies that can successfully transition to a higher share of EAF and decarbonize their operations among Steel manufacturers, as we detailed in our ESG of the Future report.