Goldman Sachs GS SUSTAIN: ESG of the Future Chemicals Our analysis comprises 94 companies in the Chemicals sector, though the response rates was the lowest among the seven sectors. We consider 29 companies based in Americas, 28 based in EMEA and 37 based in Asia Pacific. However, we note that our analysis relies on GHG emissions estimates for only 9 of those companies. In our view, this is due to a combination of (1) difficulty by our analysts to forecast emissions given limited visibility into products mix and (2) lack of disclosures of emissions intensities on a product-by-product basis. Based on our colleagues Carbonomics work, given the impossibility to adopt a single activity metric in such a heterogenous sector, we define an activity metric index — referred to 2019 base. Scope 1+2 emissions for Chemicals companies are then divided by such index to obtain comparable emissions intensities among different operations. We note our analysis for Chemicals excludes US and EU commodity Chemicals due to limited analyst visibility in forecasting emissions: our data reflects largely Fertilizers/Agricultural Chemicals trends. We see emissions intensities for the Chemicals companies we forecast declining by about 12% in 2025E vs. 2019, while absolute emissions are projected to increase by 10% in the same period. On a market cap weighted average-basis, Scope 1+2 emissions intensities are forecast to see YoY declines between 1%-4% in 2020-2025E. See Exhibit 34 for more details. On an absolute basis, we see Scope 1+2 emissions in the Chemicals sector to increase by about 10% in 2025E vs. 2019 — or a 2% CAGR in the same period — but were more than offset by rising production volumes, resulting in a decrease of emissions intensities on a net basis (see Exhibit 35). Why we believe this will matter for investors. In our view, the Chemicals sector could be a potential key area of focus for investors due to hydrogen and ammonia, among other key products. We believe investors will increasingly be willing to reward Chemicals companies that are exposed to those verticals and are able to successfully decarbonize their operations. On hydrogen, as recently detailed, our Carbonomics team anticipates global demand for hydrogen to increase 2x-7x by 2050 vs. 2020 base — depending on the scenario considered. In addition, further acceleration — particularly on Green Hydrogen — could be seen on the back on policy initiatives such as REPowerEU and general heightened focus on renewables stemming from the Russia/Ukraine conflict. Investment Implications. As reflected in Exhibit 18 , the Chemicals sector is modestly overweight (27%) in ESG funds vs. respective benchmarks. We believe investors could potentially reward those companies that are able to successfully decarbonize their operations, leading to higher recognition among ESG funds. Given the heterogeneity of the sector, we see exposure to the hydrogen or biofuels supply chain as potential catalysts for greater appreciation by ESG investors.