Goldman Sachs Asset Management, the fund arm of Goldman Sachs, said on Tuesday it had raised $1.6 billion for its first private equity fund focused on investing in companies providing climate and environmental solutions.
The final close of GSAM’s Horizon Environment & Climate Solutions I comes as investors increasingly turn their attention to companies that can help in the world’s fight against global warming.
The fund, launched in 2021, provides so-called “growth capital” to companies further along in developing solutions in clean energy, sustainable transport, waste and materials, sustainable food and agriculture and ecosystem services.
“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.”
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GSAM’s Horizon fund has made 12 investments so far of between $80 million-$90 million including in Northvolt, a Swedish battery developer and Recover, a company that recycles textile waste to create sustainable fibers.
Each investment targets and is measured on specific sustainability outcomes such as acres of wetlands restored or tons of CO2 sequestered, Pontarelli said.
While investors have long invested in real assets such as wind and solar, or in early stage venture capital, the demand for the fund showed they were increasingly willing to back bigger companies, Pontarelli said.
“In 2019 you saw greater willingness of institutional allocators to think about climate as a big theme beyond just the hard assets,” he said. “In every quarter [since] we’ve seen more client interest in and around this theme.”
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In December private equity firm General Atlantic launched a $3.5 billion climate fund while a month earlier Morgan Stanley Investment Management launched a $1 billion private equity strategy to invest in companies that will help reduce 1 gigatonne of carbon dioxide emissions.
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