Crossing the Rubicon: Our investment framework for the next decade

Accelerating change in global industries
Companies compete against a backdrop of
accelerating structural change in the global
economy, society and environment. Competitive
pressures in each industry are intensifying,
driving increasing bifurcation between well and
poorly positioned companies. GS SUSTAIN
provides an objective, consistent framework
linking these structural trends to investment
conclusions in each industry.
Outperformance from industry leaders
Despite the rising importance of structural trends
to financial performance, the equity market
continues to focus on near-term earnings, and
discount limited differentiation in return on capital
for companies in each sector beyond three years.
As a result, investing in large cap companies that
are able to sustain superior returns over the long
term has consistently generated outperformance,
particularly over longer holding periods. In fastgrowing
emerging industries, we find that
valuation and shareholder returns are closely linked
to the growth that companies deliver.
Mature leaders offer sustainable returns
In established industries, the GS SUSTAIN
framework is designed to identify the companies
that are best positioned to sustain superior return
on capital over the long term. Our analysis
combines: (1) the returns forecasts of our global
sector analysts with objective, quantifiable
measures of (2) industry positioning and (3)
management quality (based on environmental,
social and governance factors).
Emerging leaders offer sustained growth
In nascent, fast-growing markets, the GS
SUSTAIN framework is designed to identify
smaller cap companies that: (1) are exposed to
structural growth trends, (2) our analysts forecast
to deliver top-quintile growth relative to global
coverage, (3) trade on attractive multiples relative
to this growth, and (4) have strong competitive
positions.
The GS SUSTAIN Focus List brings together the
leaders that our analysis highlights across both
mature and emerging industries.