Note: The following is a redacted version of the original report published June 13, 2022 [54 pgs]. EQUITY RESEARCH | June 27, 2022 | 10:19AM EDT GREEN CAPEX Greenflation, Returns and Opportunity The Russia-Ukraine war, inflation, recognition of the need for energy reliability and rising interest rates are driving debates around how private sector and public sector commitment to Green Capex will evolve and whether this raises or lowers the attractiveness of investment opportunities towards achieving Net Zero, Infrastructure and Clean Water goals. We continue to see Green Capex as an underappreciated secular growth trend as investments rise towards Decarbonization, Infrastructure and Clean Water goals. Even as the incremental $2.8 trillion in annual investment needed this decade vs. 2016-20 is not fully on track: (a) capex + R&D medium-term growth expectations have risen over the past six months, both on an absolute basis and modestly relative to operating cash flow; and (b) governments appear more committed to increasing or stimulating Green Capex, particularly in Europe. We believe corporate returns and forward corporate returns momentum will be a key driver of stock performance, and in this report we present screens that highlight sectors where we see favorable, resilient and/or improving corporate returns levered to technologies needed in the Green Capex mosaic. Brian Singer, CFA +1 212 902-8259 brian.singer@gs.com Goldman Sachs & Co. LLC Enrico Chinello, Ph.D. +1(212)357-3398 |enrico.chinello@gs.com Goldman Sachs & Co. LLC Michael Hao Wu, CFA +1(917)343-1137 |michael.h.wu@gs.com Goldman Sachs & Co. LLC Derek R. Bingham +1(415)249-7435 derek.bingham@gs.com Goldman Sachs & Co. LLC Evan Tylenda, CFA +44(20)7774-1153 evan.tylenda@gs.com Goldman Sachs International Sharmini Chetwode, Ph.D. +852-2978-1123 sharmini.p.chetwode@gs.com Goldman Sachs (Asia) L.L.C. Madeline Meyer +1 212 902-5513 madeline.r.meyer@gs.com Goldman Sachs & Co. LLC Keebum Kim +852-2978-6686 keebum.kim@gs.com Goldman Sachs (Asia) L.L.C. Brendan Corbett +1(415)249-7440 brendan.corbett@gs.com Goldman Sachs & Co. LLC Emma Jones +61 2 9320-1041 emma.jones@gs.com Goldman Sachs Australia Pty Ltd Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. The Goldman Sachs Group, Inc. Goldman Sachs GS SUSTAIN Table of Contents PM Summary 3 Green Capex needs remain robust: Updating what we believe is on track 8 Capex + R&D expectations have moved higher in recent months, with modest increase in reinvestment rate 12 Implications to corporate returns: Mixed overall, but still favorable momentum in coming years among Green Capex sectors 16 Green Capex spare capacity has expanded, but more concentrated in oil/gas 21 Economic growth and consumer impact are key risks 25 Innovation could accelerate in Clean Reliable Energy and Energy Efficiency as a result of greater deployment 29 Policy support leading to rise in long-term investment in Europe 32 Sectors that stand out post our latest update 37 Green Capex increases have not been appreciated in stock prices over the past six months 41 How GS SUSTAIN can help 43 Disclosure Appendix 46 The following is a redacted version of Goldman Sachs Research’s report “Green Capex: Greenflation, Returns and Opportunity” originally published June 13, 2022 (54pgs). All company references in this note are for illustrative purposes only and should not be interpreted as investment recommendations. 27 June 2022 2 Goldman Sachs GS SUSTAIN PM Summary We continue to see Green Capex as an underappreciated secular growth trend as investments rise towards Decarbonization, Infrastructure and Clean Water goals. Even as the incremental $2.8 trillion in annual investment needed this decade vs. 2016-20 is not fully on track, capex + R&D growth expectations for Green Capex critical sectors have more than doubled — FactSet consensus now implies a 5.3% CAGR in 2021-24 vs. 2.5% previously. With price inflation a ne