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Goldman uptakes ESG investment in Asia as bets turn out effective

Published on: 21 December 2021 02:00 PM
Goldman Sachs has completed nearly 15 investments based on ESG criteria in the past two years

A Brief Summary

The Newyork-based bank golden Sachs increases its investment in Asia to meet a growing need from clients to limit their greenhouse gas footprints. It is also planning to widen other types of environmental and socially responsible projects with potential investors and companies in Asia. The decision comes as Goldman sees bets paying off.

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Goldman Sachs Group has more than tripled its investments in environmental, social, and governance (ESG) across Asia, stepping up efforts to address the growing demand from customers to reduce their carbon footprints. According to persons familiar with the situation, the American bank has executed over 15 investments based on ESG criteria in the last two years, up from only four in the preceding time. In an effort to widen its drive into other types of environmentally and socially responsible initiatives, it is in talks with many large investors and companies in Asia.

Mr. Takashi Murata, co-head of alternative investing in Asia, said in an interview that "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," declining to name potential partners or the size of the investments. While our initial ESG investments were primarily focused on achieving climate transition through sustainable energy, our ultimate goal is far broader.

The drive comes as Goldman sees earlier investments pay off through exits after making its first bets on renewable energy in Asia in 2006, and has put up around US$3.5 billion (S$4.8 billion) in over 20 Japanese solar projects since 2013, according to the people.

According to an MSCI study of 200 institutional investors handling roughly US$18 trillion, the growing climate issue is increasing the focus on ESG, but the global pandemic has also highlighted the need for more social investing.

According to the persons, Goldman has already sold half of its solar projects in Japan, including a US$1.8 billion stake sale in Japan Renewable Energy to Eneos Holdings in October.

It has also made renewable energy investments in China and Korea, as well as a partial departure from Renew Power, India's largest renewable energy provider, after merging with a blank-check company in August with a US$1.2 billion Nasdaq offering. Goldman Sachs is up against very tough competition. According to data from Preqin, which tracks the market, a record 132 so-called impact funds have launched this year.

According to data provided by Bloomberg, the sector has amassed a total of US$20 billion since 2015.

Investments in renewable energy, health care, affordable housing, and other socially relevant industries are frequently the focus of impact funds.

According to Bloomberg Intelligence, global ESG assets are on track to hit US$53 trillion by 2025, accounting for more than a third of the expected total assets under management of US$140.5 trillion (BI).

While Europe contributes for half of the worldwide ESG assets, the United States is presently the fastest growing and may overtake Europe by 2022.

According to the BI study, the next wave of development could come from Asia, particularly Japan.

Goldman Sachs, albeit not its fund management company, was among the banks, investors, and insurers who signed the Glasgow Financial Alliance for Net Zero last month, pledging to decarbonize by the middle of the century. Activists and organizations questioned if big finance could quickly wean itself off fossil fuels, thus the initiative was welcomed with skepticism. Goldman, like others, has previously stated that ceasing to cooperate with the business is not an option.

"We have to acknowledge that we are trying to create extremely profound change," Goldman CEO David Solomon said last month at the Bloomberg New Economy Forum in Singapore, emphasizing that the transition will take time.

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