(Bloomberg) -- Goldman Sachs Group Inc. has more than tripled environmental, social and governance investments in Asia, stepping up efforts to meet a growing need from clients to limit their greenhouse gas footprints.
The New York-based bank has completed nearly 15 investments based on ESG criteria in the past two years, up from just four during the previous period, people familiar with the matter said, asking not to be identified because the information isn’t public. It’s also in discussions with several major investors and companies in Asia, in an effort to broaden its push into other types of environmental and socially responsible projects.
“We’ve raised and will continue to explore customized mission-driven funds to address the diverse needs of our client investors who need to deploy private capital across the globe in this space,” Takashi Murata, co-head of alternative investing in Asia, said in an interview, declining to name the potential partners or the size of the investments. “Our initial ESG investments have been primarily focused on advancing climate transition through clean energy, but our goal is much broader.”
The push comes as Goldman is seeing earlier investments pay off through exits after making its first bets on renewable energy in Asia back in 2006, and has since 2013 put up about $3.5 billion in more than 20 Japanese solar projects, the people said. The growing climate crisis is accelerating the focus on ESG, but the global pandemic has also underscored the need for greater social investing, an MSCI survey of 200 institutional investors overseeing about $18 trillion found.
Goldman has now disposed of half of its solar projects in Japan, including the $1.8 billion stake sale of Japan Renewable Energy Corp. to Eneos Holdings Inc. in October, the people said. It has also made renewable energy investments in China, Korea and made a partial exit in Renew Power, India’s largest renewable energy generator, through a $1.2 billion Nasdaq listing in August after merging with a blank-check company.
Stiff Competition
Goldman is facing stiff competition. A record 132 so-called impact funds have started this year, according to data from Preqin, which tracks the industry. The category has amassed $20 billion since 2015, data compiled by Bloomberg show. Impact funds often target investments in renewable energy, health care, affordable housing, or other socially important industries
Global ESG assets are on track to exceed $53 trillion by 2025, or more than a third of the $140.5 trillion in projected total assets under management, according to Bloomberg Intelligence. While Europe accounts for half of global ESG assets, the U.S. is now picking up the fastest and may dominate the category starting in 2022. The next wave of growth could come from Asia -- particularly Japan, according to BI research.
Goldman, though not its fund management unit, was among banks, investors and insurers that last month committed to decarbonizing by mid-century as signatories of the Glasgow Financial Alliance for Net Zero. Still, the initiative was met with skepticism as activists and nonprofits questioned whether big finance is capable of rapidly weaning itself off fossil fuels. Goldman, along with others, have previously made it clear it’s not feasible to stop working with the industry.
“We have to recognize we are trying to drive very dramatic change,” Goldman Chief Executive Officer David Solomon said at the Bloomberg New Economy Forum in Singapore last month, emphasizing that the transition will take time.
At least since the landmark 2015 Paris climate agreement, things have been getting worse rather than better. Banks have organized almost $4 trillion of bonds and loans for the oil, gas and coal sectors since then, compared with only $1.6 trillion of green-labeled bonds and loans, according to Bloomberg-compiled data.
Broader Focus
But now, global banks are starting to direct more funds toward the green sector. Goldman, JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Morgan Stanley have committed $4 trillion to address climate issues over the next decade, according to Wells Fargo analysts led by Mike Mayo.
Goldman said on Thursday that it plans to reduce the carbon footprint of its fossil-fuel clients by a fifth, and slash emissions in other key customer groups as it acts on a pledge to make its business climate neutral. That means lowering the financed emissions of oil and gas companies by up to 22% by 2030, compared with a 2019 baseline, it said.
Goldman Sachs Asset Management was among investors in a venture created in October with Generation Investment Management LLP, the investment firm co-founded by Al Gore. The firm targets investments with the greatest potential to drive rapid decarbonization. Globally, the bank is also developing a data system to track and accurately report on ESG performance, Murata said.
Besides renewable energy, Goldman is looking in Asia at broader investments with a focus on the shift to new energy supplies and social sustainability themes such as disability housing, Murata said. The bank recently hired Marit van Rheenen from Jones Lang LaSalle Inc. in a new role to lead the firm’s ESG efforts in real estate in Europe and Asia.
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