The Goldman Sachs Group, Inc. GS has pledged an investment of $150 billion towards clean energy projects and technologies by 2025, significantly expanding its previous 10-year target of $40 billion set in 2012.
The company will provide financing to solar and wind projects, power grid infrastructure as well as energy efficient upgrades so as to facilitate “transition into a low-carbon economy.” Apart from financing, Goldman plans to increase the capital efficiency of such projects through yield-oriented vehicles and securitization mechanisms. Notably, the company is presently working to securitize clean energy projects worth $1 billion in Japan.
Further, the company is also focusing on enhancing the reuse and recycle of water along with efficient wastewater management. Moreover, the company is expected to continue to issue green bonds, in order to raise capital for environment-friendly projects.
Also, the company will refrain from providing finance to coal fired power generation projects and apply increased due diligence before investing in coal mining as well as hydraulic fracturing projects.
At the same time, it is expected to make internal investments of $2 billion in the next 10 years, so as to make its operations more sustainable.
What Does It Signal?
The latest move by Goldman reflects the Wall Street giant’s bullishness on the clean technology industry. Kyung-Ah Park, managing director at the company’s Environmental Markets Group expects the market to “become much bigger” as countries like China are looking towards sustainable sources of energy.
However, the stock performances of industry players like SolarCity Corporatio and SunEdison, Inc., which have plummeted nearly 50% and 65%, respectively, over the past 3 months, paint a different picture. According to a WSJ report, “A sharp drop in prices for oil and natural gas, along with the looming expiration of a federal subsidy on renewable energy costs” has made investors skeptical about the prospects for the industry.
Goldman currently has a Zacks Rank #3 (Hold).
The contribution of the banking sector toward combating environmental concerns has been commendable. Last month, Citigroup Inc. C revealed that it is set to cut its funding pipeline to coal mining companies amid concerns over global warming. Moreover, in Feb 2015, the company pledged a $100 billion commitment to finance green initiatives over the next 10 years.
In Aug 2015, U.S. Bancorp USB and Zions Bancorporation ZION entered into a syndication agreement to provide tax equity financing of more than $200 million for a renewable project in Arizona, reflecting their increasing focus on sustainable energy and clean technology.
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