Goldman Sachs launches clean energy ETF as ESG popularity soars
Goldman Sachs is getting green as sustainable equity strategies attract record investor capital.
The asset management arm of Wall Street’s premier investment bank on Thursday announced the launch of the Goldman Sachs Bloomberg Clean Energy Equity ETF — set to trade under the ticker GCLN.
The fund, created by Goldman Sachs Asset Management and energy sector specialists at Bloomberg, will track companies with the greatest exposure to the clean energy transition and follows a joint initiative set forth last year by CEOs David M. Solomon and Michael Bloomberg to capitalize on opportunities generated by the transition to clean energy.
Goldman’s new fund comes as environmental, social and governance-focused investment vehicles attract record amounts of investment capital — and deliver stellar returns. Last year, the 13 ESG index funds that follow broad, diversified indexes of U.S. large-cap stocks posted an average gain of 29.2% to beat the S&P 500 (iShares Core S&P 500 ETF returned 28.7%), according to Morningstar research. Seven of the ESG funds generated returns of more than 30%.
The new ETF by Goldman and Bloomberg is designed for investors looking to own “clean energy enablers,” a universe of around 200 companies seeking growth opportunities to combat climate change and provide clean, affordable and reliable energy, Goldman Sachs said.
GCLN will track the Bloomberg Goldman Sachs Global Clean Energy index (BGSCET), market cap-weighted index with exposure to 175 global equities deemed having “significant business exposure” to the clean energy sector.
“With a continuously evolving market, clean energy companies needed a new benchmark to better understand the performance within the sector,” said Dave Gedeon, Bloomberg's global head of multi-asset indexes.
Goldman said the fund offers access to the multi-decade clean energy transition estimated to see capital reach in excess of $100 trillion.
“We think that this is going to be a great long-term opportunity for investors,” said Katie Koch, Goldman Sachs Asset Management's chief investment officer of public equity, in a call with reporters. “We also want to emphasize that this moment now is giving a current attractive entry point from a valuation perspective, so it’s a really good time to get clean.”
Interest in ESG investing 'just getting started'
LPL Financial’s head of investment manager research and sustainable investing research Jason Hoody pointed out in a recent note that sustainable investing mutual funds and exchange-traded funds continue to attract record flows from investors.
Assets grew 52% from the year before to $362 billion as of Dec. 31, 2021, per LPL.
Moreover, the lineup of sustainable investing mutual funds and ETFs have also grown since the first was launched in 1971, according to Hoody. In 2021, the number of available choices grew 44% to 560.
Over the past decade, investor inquiries about sustainable and ESG strategies have overtaken inquiries about more traditional investment options, according to Peter Essele, head of portfolio management for Commonwealth Financial Network.
“Strong evidence suggests that the interest in ESG products and solutions is just getting started,” Essele said in a separate note recently, adding that an estimated $73 trillion in investor assets are expected to be transferred to sustainable products over the next 25 years.
As an ETF, GCLN will trade on an exchange — specifically, the Cboe BZX Exchange — like other publicly-traded securities.
The launch is one of several ESG-focused efforts by Goldman Sachs, which vowed to deploy $750 billion in sustainability-focused financing, investing and advisory activity by 2030 to “accelerate climate transition and advance inclusive growth.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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