Environmental Market Opportunities
Green Bonds and Impact Investing
Through our investing and financing teams, Goldman Sachs has been at the forefront of developing market-based solutions to addressing environmental and social challenges. We have facilitated several “firsts” for the green bond market and have catalyzed innovative structures to raise capital for projects that benefit the environment and strengthen communities.
Green bonds are a fixed-income instrument where the capital raised is dedicated for programs that benefit the environment—for example, delivering clean water, promoting renewable energy sources or increasing efficiency. More recently, the market has further evolved to include social and sustainability bonds, with a similar structure to green bonds but targeted to social and sustainability projects like affordable housing and small business growth. In addition to acting as an underwriter, we are committed to developing innovative applications for these types of bonds. Examples of transactions we’ve worked on include:
- Alexandria Real Estate Equities, Inc.
- Equilibrium Capital
- Council of Europe Social Inclusion Bond
- IFFIm – International Finance Facility for Immunization
Environmental Impact Bonds
Goldman Sachs has also been a pioneer in the deployment of “environmental impact bonds,” an innovative and emerging financial instrument that leverages private investment to support high-impact environmental programs, where repayment is correlated to specific performance outcomes.
Some of the same principles that Goldman Sachs pioneered with “social impact bonds” were leveraged to address green opportunities, where the private and public sectors can partner to bring much needed capital to high impact, underserved opportunities. We invested in the first-ever Environmental Impact Bond for DC Water. Read more here.
In March 2019, Goldman Sachs acted as joint bookrunner on Alexandria Real Estate Equities, Inc.’s $850 million investment grade bond offering. The net proceeds from two tranches in this three tranche offering will be used to fund eligible green projects including development, redevelopment or tenant improvement projects that have received or are expected to receive Gold or Platinum LEED certification. This was Alexandria’s second green bond issuance. Goldman Sachs also led their first green bond transaction in June 2018.
In October 2018, Goldman Sachs served as lead manager for the first renewable natural gas (RNG) project financing in the US capital markets. The renewable natural gas plant, located in Arizona is majority owned by Equilibrium Capital, a global asset manager of sustainable real asset investment strategies. The Plant will convert manure from dairy operations, along with nearby FOG (fats, oil and grease) waste, into RNG that will primarily be used as transportation fuel with carbon emission reductions equivalent to over 24 million gallons of conventional gasoline per year. This transaction was also awarded the ‘Green Project Bond of the Year’ by Environmental Finance.
Goldman Sachs was joint global coordinator, bookrunner and structuring advisor in a €550 million green bond for GetLink, operator of Eurotunnel and Europort. The issuance, one of a few high yield green bonds, will finance a range of green assets, primary among them ElecLink, a 1,000-megawatt direct-current interconnector between France and the United Kingdom capable of carrying enough electricity to power 2 million homes (completion subject to regulatory approval) . The project increases power flow between the two countries by 50 percent, and enables France, with its relatively low carbon infrastructure, to send more power to the UK, which is more reliant on fossil fuels. Construction began in 2017 and is expected to last three years, with service scheduled to begin by early 2020.
In March 2018, Goldman Sachs acted as joint lead manager on Council of Europe’s €500mm second Social Inclusion Bond. This builds on our April 2017 role as joint lead manager on a €500mm 7-year Social Inclusion bond for Council of Europe (COE). The 2017 issuance was COE’s first ever Social Inclusion Bond, which will fund loans to eligible social related sectors including, social housing for low-income populations, education and vocational training and, support for micro, small and medium-sized enterprises (MSMEs) for the creation and preservation of jobs.
IFFIm raises funds for immunization programs disbursed by Gavi, the Vaccine Alliance, by issuing vaccine bonds in the capital markets and repaying these bonds with long-term donor pledges — offering a market-rate return while demonstrably saving lives. In 2017, Goldman Sachs helped bring to market a $300 million floating rate note vaccine bond. This was IFFIm’s fourth access to the USD market in syndicated format. This is de facto the longest-standing social bond issuer — beginning before “social bonds” existed as a discrete concept. IFFIm was established in 2006, and Goldman Sachs led IFFIm’s inaugural bond, a $1 billion 5-year benchmark issuance.
In February 2019, Goldman Sachs served as lead bookrunner on Verizon’s first green bond, valued at $1 billion. The transaction was Verizon’s first green bond issuance and the first green bond issued in the telecom sector by a US corporate. Proceeds from the offering will be used to fund new and ongoing projects that help drive Verizon’s sustainability initiatives related to renewable energy, waste and water management.