Ken Pontarelli, Goldman Sachs Asset Management
Ken Pontarelli, Goldman Sachs Asset Management

Credit strategies represent an “interesting opportunity” in the climate investing space, according to Ken Pontarelli, head of sustainable investing for Goldman Sachs Asset Management.

Pontarelli’s sustainable investing unit closed its first fund at the start of 2023: a $1.6 billion growth equity vehicle investing in climate solutions. It has subsequently launched an “inclusive growth” strategy to invest in companies that tackle social issues related to inequality in the US.

Four of Goldman Sachs’ 10 most read client research reports last year related to the climate transition, including its single most read, Pontarelli told delegates at NEXUS 2024 last week. He was describing the decision-making process behind launching the firm’s debut climate fund.

“Whatever way you want to measure this, this is a very large number of dollars that are gonna be spent and it’s growing in a pretty healthy clip,” he said of the energy transition and industrial decarbonisation.

Goldman Sachs’ Horizon Environment & Climate Solutions fund is one of a handful of sizeable funds in the market with either a partial or full focus on growth equity in the climate solutions space. Others would include General Atlantic’s BeyondNetZero and TPG’s Rise Climate series.

“Whether you are sustainability or impact-minded or not, these are good fundamentals to be following… We then try to think about where are the juiciest opportunities we can do a good job; we came to the conclusion that the growth equity, lower mid-market private equity sector was one that was underpenetrated,” he said, noting that other areas such as real assets and venture capital had seen relatively more capital formation.

“When we scan the landscape of where there are other interesting opportunities, there are some parts of real assets and infrastructure that are not classic wind and solar, which we think are interesting.

“Interestingly, now credit has emerged as an interesting opportunity in and around these markets, because whenever you have such a big capital spend, a lot of it is going to be credit formation, versus equity.”