In a major sign of confidence during a period of “rolling uncertainty” in the global renewable energy market, Goldman Sachs says it will invest $40 billion in the sector over the next decade.
The investment bank is already a major financier of renewable energy and energy efficiency around the world, putting $4.8 billion into projects last year alone.
Taken across the next decade, the new $40 billion plan would mean that Goldman is investing $800 million less per year than in 2011. However, it would still roughly equal the rate of investment during its first major foray into the sector between 2005 and 2011, according to Reuters:
In 2005, Goldman pledged to invest and finance $1 billion of environmentally friendly projects. By the end of 2011, the company had exceeded its goal, arranging $24 billion worth of financing and investing $4 billion into such projects, said Kyung-Ah Park, head of environmental markets at Goldman.
So is this a real vote for the sector or a public relations ploy?
Goldman was thrust back in the spotlight in March after a former executive wrote an op-ed lambasting the bank for “toxic and destructive” behavior.
“The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for,” wrote former Executive Director Greg Smith.
And in April, Goldman was given an “F” on a report card grading investment banks for their coal financing activities. While the bank actively monitors and reports emissions from coal-fired power plants it owns in the U.S., Goldman still doesn’t have a stated policy on destructive mountaintop removal coal mining.
There’s no doubt that Goldman — and every other investment bank — sees the opportunity to invest in renewable energy as a way to improve its brand. But committing $40 billion to the sector is more than a public relations campaign. It’s a clear sign that banks see the benefits of investing in these technologies.
“When investors deploy capital into renewable energy projects, they’re investing in proven technologies: solar PV, wind, biomass, geothermal. These technologies can be put to work today. Deals can be structured such so that investors can enjoy virtually bond-like, long-term returns with immediate yield,” said Bill Green, senior managing director of Macquarie Infrastructure and Real Assets, in a recent interview.
Goldman executives agree with that assessment. From the Reuters story:
Stuart Bernstein, head of Goldman’s clean technology and renewables investment banking group, compared the opportunity to technology investments in the 1990s or investing 10 years ago in fast-growing countries like Brazil, Russia, India and China, for which Goldman economist Jim O’Neill coined the term “BRIC” in 2001.
“This is another emerging opportunity we think will be quite large,” Bernstein said.
“Obviously we recognize this is not the easiest of times in the clean energy market but nevertheless the underlying thesis as to why cleaner and more sustainable forms of energy need to scale up still holds true,” Park said.
In 2011, global investments in clean energy totaled $260 billion — bringing cumulative investments since 2004 to over one trillion dollars. Last year was also the first time that investment in renewable energy surpassed fossil fuels.