In brief: There is an ‘appropiate’ amount of capital chasing climate deals, says Goldman

Goldman Sachs’ head of EMEA private equity Michael Bruun does not think we are at the “too much money chasing too few deals” stage when it comes to climate-focused growth equity investments.

“I’m not sure there is yet too much money for the scale of the problem we are trying to solve. It’s a very daunting task that’s ahead of us,” he said at a roundtable event this week.

It is a mixed picture, however, with “a lot of smaller platforms currently available for investment that may not ultimately succeed”.

“So could there ultimately be losses incurred during that selection process? And could valuations be at very elevated levels? Potentially,” he said.

While the amount of total capital required to effect the energy transition is daunting – $56 trillion according to Goldman Sachs’ research – there is a scarcity of “scaled investment opportunities” noted Bruun, “which is why you are seeing this phenomenon of quite a lot of capital chasing relatively small opportunities… even though… the amount of total capital that’s actually needed to effect the climate transition is very vast”.

“As all of these technologies scale and are further advanced, I would think there is an appropriate amount of capital chasing this. In certain areas, I don’t think there is enough risk capital; that’s where governments need to step in and help clarify the pathway for people to make an appropriate investment return.”