Goldman Says It's Learned From Venezuela `Hunger Bonds' Backlash

(Bloomberg) -- It’s been 10 months since Goldman Sachs Group Inc.’s purchase of Venezuelan debt blew up into what would become known as the “hunger bonds” controversy. The episode has faded out of the spotlight since then and has largely been forgotten on Wall Street.

But not inside the halls of Goldman Sachs.

Sheila Patel, the CEO of Goldman Sachs Asset Management’s international division, said in an interview that the incident turned into a teachable moment within the firm and helped sharpen its focus on investing with an eye toward environmental, social and governance policies, or ESG.

“It was a tremendous learning experience,” Patel said. “But most importantly, it has actually been a big driver of us spending a lot more time on ESG.”

Back in May, things unraveled fast on Goldman after its asset management unit scooped up almost $3 billion of debt issued by state-run Petroleos de Venezuela for pennies on the dollar. They were dubbed the “hunger bonds,” a nod at the nation’s deepening humanitarian crisis. Protests erupted outside Goldman’s headquarters, and politicians and activists across the globe condemned the transaction, saying it had indirectly funneled money to an autocratic regime.

To make matters worse for Goldman, the notes have been in default for more than four months. Squeezed by a crippling recession and foreign sanctions, the country has begun halting payments on much of its overseas debt. The bonds now trade at 21 cents on the dollar, down from the roughly 31 cents that Goldman Sachs reportedly paid for them.

--With assistance from William Mathis

To contact the reporter on this story: Ben Bartenstein in Lima at bbartenstei3@bloomberg.net.

To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, David Papadopoulos at papadopoulos@bloomberg.net, Brendan Walsh

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