Thursday, November 30, 2023

Goldman Sachs Raises $1.6 Billion for Its Climate-Focused Equity Fund


Goldman Sachs Asset Management (GSAM), the lending giant’s finance arm, says it has raised $1.6 billion for Horizon Environment & Climate Solutions, its first private equity fund focused on efforts fighting climate change.

The Horizon fund is managed by the Sustainable Investing Group, established at Goldman Sachs in 2020.

“Horizon Environment & Climate Solutions I represents the transformative power of private capital to help scale cutting-edge technologies that will make a meaningful impact in the race to net zero,” Julian Salisbury, Chief Investment Officer for Asset & Wealth Management at Goldman Sachs, said in a statement. “We are grateful for the support of our clients in partnering with us on this inaugural fund and are excited for the journey ahead as the focus on sustainability increases in importance across our investing businesses.”

The Horizon growth capital fund launched in 2021 aimed at supporting established companies working in clean energy, sustainable transport, waste and materials, sustainable food and agriculture, and ecosystem services.

‘The center of the bullseye’

“Lots of organizations are trying to operate more sustainably and looking for solutions that enable them to do that,” Ken Pontarelli, head of sustainable investing for private markets within Goldman Sachs Asset Management, told Reuters.

“The center of the bullseye that we look for … is if we can invest in companies that have products and services that enable other organizations to cost-effectively meet their sustainability objectives, that’s a winner,” said Pontarelli.

electric car batteries
EVs are part of the GSAM investment strategy | Chuttersnap/Unsplash

To date, GSAM’s Horizon fund has made 12 investments ranging from $80 million to $90 million, with investments totaling nearly $1 billion. Recipients include Northvolt, a Swedish battery developer, and Recover, a company that recycles textile waste to create sustainable fibers.

Companies are analyzed and measured on sustainability outcomes including CO2 sequestration and wetland restoration, among other criteria.

“In 2019 you saw greater willingness of institutional allocators to think about climate as a big theme beyond just the hard assets [such as wind and solar],” Pontarelli said. “In every quarter [since] we’ve seen more client interest in and around this theme.”

Climate investing

Goldman Sachs has been investing in transformative environmental and climate solutions since 2005, Pontarelli said. “Since then, we have witnessed major changes in the technologies that enable more efficient and sustainable business practices, and the appetite from users to adopt them. Today, as the imperative to transition to a more sustainable economic growth model gathers pace, we are excited to continue backing leading businesses in this space as they develop and scale the environmental and climate solutions of tomorrow.”

Goldman Sachs established its Environmental Policy Framework in 2006. “We take seriously our responsibility for environmental stewardship and believe that as a leading global financial institution we must play a constructive role in helping to address environmental challenges,” the lender says on its website.

deloitte $1 billion investment
Courtesy Harry Cunningham | Unsplash

“To that end, we will work to ensure that our people, capital and ideas are used to help find innovative and effective market-based solutions to address climate change, ecosystem degradation and other critical environmental issues, and we will seek to create new business opportunities that benefit the environment. In pursuing these objectives, we will not stray from our central business objective of creating long-term value for our shareholders and serving the long-term interests of our clients.”

The lender says delaying action on climate change “will be costly for our natural environment, to humans and to the economy, and we believe that urgent action by government, business, consumers and civil society is necessary to curb greenhouse gas emissions.”

“How governments and societies choose to address climate change will fundamentally affect the way present and future generations live their lives,” Goldman Sachs says on its website. “Markets are particularly efficient at allocating capital and determining appropriate prices for goods and services. Governments can help the markets in this regard by establishing a clear policy framework that, among other things, provides transparency around the costs of greenhouse gas (GHG) emissions and creates long-term value for GHG emissions reductions and investments in new technologies that lead to a less carbon-intensive economy. In addition to mitigation, which is a critical component of any strategy, governments and societies need to improve adaptability and strengthen resiliency as part of a comprehensive solution.”

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