Goldman Sachs sells its first ESG bonds

Strong investor demand for sustainable investments pushes offering at the last minute up by $50 million to $800 million.

Goldman Sachs Group Inc. sold bonds aimed at financing environmentally and socially conscious projects for the first time, joining other Wall Street banks tapping the fast-growing market.

The New York-based lender issued $800 million in sustainable bonds after the offering was upped by $50 million amid strong investor demand, according to a person with knowledge of the matter. The single-tranche deal maturing in five years yields 0.4 percentage point above Treasuries, after initial price talk of about 0.6 percentage point.

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Goldman Sachs plans to use proceeds from the sale to fund or refinance a combination of loans and investments made in projects and assets that meet its green and social eligibility criteria, according to the firm’s sustainability issuance framework. That includes priorities such as clean energy, sustainable transport and financial inclusion.

The biggest U.S. banks are joining companies from Alphabet Inc. to Visa Inc. in issuing sustainable bonds amid pressure for the private sector to do more to address environmental, social and governance issues. JPMorgan Chase & Co. priced a $1 billion social bond on Tuesday and raised a similar amount of green debt last year. Citigroup Inc. issued $2.5 billion via the sustainable bond market in October, the largest-ever deal of its kind.

President Joe Biden’s initiatives to combat climate change are expected to accelerate sales of sustainable debt and draw more attention to ESG investments in the coming years. Issuance may reach $1 trillion in 2021 amid U.S. and European stimulus efforts, robust investor demand and low funding costs, according to Bloomberg Intelligence.

“Goldman’s issuance and the strong pace of social and green issuance over the last year is directly related to investor demand we are seeing and issuers trying to meet it,” said Vishal Khanduja, director of investment-grade fixed-income portfolio management and trading at Eaton Vance Corp. “We continue to forecast a bigger percentage of bond sales being earmarked for ESG projects this year.”

Morgan Stanley priced $1 billion of socially responsible bonds in October, while Bank of America Corp. issued $2 billion of bonds that aim to advance racial equality in September. That followed $1 billion the bank issued to fund Covid-19 relief efforts in May, the first such sale from a U.S. financial institution.

Goldman Sachs has set a target of $750 billion of financing, investing and advisory activities across nine key themes tied to climate transition and inclusive growth over the next 10 years, according to its sustainability issuance framework. In October, the bank started a group focused on investment opportunities in clean energy, waste and other sustainability industries.