Environmental Market Opportunities
As a global financial institution, one of the critical roles we play in the transition to a low-carbon future is to help deploy capital to scale up clean energy technologies. The core of what we do in clean energy is through serving the capital and financial advisory needs of our clients as well as co-investing alongside them.
Through our Investment Banking Division, we are the leading financier for clean energy companies. Through our investing teams, we are one of the largest investors in alternative energy.
Expanding Our Clean Energy Target
In 2015, as part of our revised Environmental Policy Framework, we expanded our existing target to $150 billion in capital deployment for the clean energy sector by 2025, reinforcing our long-term commitment to and conviction in the clean energy sector. This builds on our $40 billion target established in 2012, a time when there was greater volatility in the clean energy markets. Since 2012, we have deployed more than $71 billion to clean energy.
This target extends our existing goal of $40 billion and includes an additional $110 billion in capital deployment by 2025. Our target is focused on the clean technology and renewable energy sector, and on commercial transactions. It includes financing and co-investments for solar, wind, sustainable hydro, biomass, geothermal, advanced biofuels, energy efficiency and advanced materials, energy storage, LED lighting, electric vehicles, and renewable energy transmission, among other clean technologies. It does not include financial advisory, market making activities, or grant-related funding for the sector.
Providing Capital to Underserved Markets
We will seek to devise and implement investment structures that bring greater investor capital to underserved markets in order to facilitate more equitable and affordable access to clean energy. To that end, we will launch a Clean Energy Access Initiative that will target the deployment of clean energy solutions, such as distributed solar and clean cookstoves, in underserved markets. Examples of prior deals:
Expanding the Investor Base and Bringing Greater Capital Efficiency
We will look for opportunities to expand the investor base and bring greater capital efficiency to clean energy projects, such as through securitization mechanisms and yield oriented vehicles. Examples of prior deals:
Solar securitizations offer an opportunity for clean energy developers to raise capital from investors through the capital markets, providing an expanded capital base and greater capital efficiency.
Solar loan purchases help deepen clean energy developers deepen pools of available future loan funding commitments at scale and diversify their sources of capital.
Supporting Advanced Technologies to Modernize the Grid
We will look for opportunities to finance and co-invest in innovative technologies that provide grid resiliency and facilitate increasing levels of reliable clean energy deployment, as well as platforms that can promote smarter, more efficient energy management and consumption. Examples of prior deals:
Case Study: ReNew Power
We have invested nearly $370 million in ReNew Power, helping establish one of the largest dedicated renewable energy developers in India with over 3.5 gigawatts in commissioned wind and solar projects. In early 2017, we signed a new long-term power purchase agreement, which enabled ReNew to build a 50-megawatt solar power plant. Together with existing wind capacity, this will meet up to 70 percent of the energy needs of our Bengaluru campus. In 2017, we served as joint global coordinator and bookrunner on ReNew’s $475 million green bond, leveraging an innovative structure to expand the company’s access to international investors. The bond provided ReNew with access to long-dated debt capital to refinance 500 megawatts of solar and wind projects across India.
Case Study: NEWARK HOUSING AUTHORITY
In 2015, Goldman Sachs provided $84 million in funding to the Housing Authority of the City of Newark (“NHA”) to finance energy efficiency improvements across its portfolio of 34 public housing communities with over 6,000 rental homes affecting 10,000 residents throughout the City of Newark. The project is a public-private partnership that uses an innovative financing technique where the cost of installing energy conservation equipment is paid for using the savings that result from reduced energy consumption in the future. It is largest of its kind for a public housing authority to date. It enables NHA to finance capital improvements that are integral to its mission of creating and maintaining livable, sustainable affordable housing communities without having to fund costs upfront.
Case Study: Solar Securitizations
In 2013, we underwrote the first rated solar securitization, via the Japan Mega Solar Bond Trust. This first securitization raised capital for a new project sponsored by Japan Renewable Energy, a portfolio company that Goldman Sachs Merchant Banking Division established in 2012 to help address Japan’s need for renewable energy post Fukushima. In 2015, we launched a $1 billion target for solar and other renewable energy securitizations in Japan. These projects help to bring clean energy developers together with institutional investors, allowing for a new path for capital flows to the sector, which in turn will facilitate a more diversified energy mix and a stronger domestic clean energy sector for Japan. Through year-end 2017, we have executed securitized green project bonds for 20 solar projects in Japan totaling 52.4 billion yen (nearly $500 million), including two innovative green project bonds for Canadian Solar which are the first of their kind with dual-tenor maturity.
Case Study: Innogy
In 2016, we served as joint global coordinator and joint book runner on innogy SE’s $5.1 billion initial public offering, the largest IPO in Germany since 2000 and Europe’s largest IPO since 2011. German utility RWE carved out innogy as a newly formed entity that is focused on developing renewable energy, modernizing the power grid that transmits power to customers, and selling electricity to customers. innogy’s core business areas are focused on utility segments that benefit from the secular trends of decarbonization, decentralization and digitization of the energy system.