Goldman Sachs eyes food and ag for impact-focused Horizon Fund

The Horizon Fund will be managed by the investment banking company’s sustainable investing group and target growth-oriented private equity investments in climate-transition related businesses.

Goldman Sachs plans to explore sustainable food and agriculture as one of five focus areas of the Horizon Fund, a vehicle that forms part of its platform for “direct-impact” investment in private markets.

According to the investment banking company’s 2020 Sustainability report released in mid-April, the Horizon Fund will be managed by the sustainable investing group, a unit within its asset management division.

In addition to sustainable food and ag, the vehicle will focus on growth-oriented investments across climate-transition themes that include waste and materials, ecosystem services and water, clean energy and sustainable transport.

Storage, processing, distribution and production related to “green” agriculture and efforts to increase sustainability and quality control in supply chains, are among food and ag-related investment areas the report describes as relevant to Goldman Sachs’ commitment to sustainable finance. For ecosystem services, the report signals interest in opportunities to improve water and air quality and promote biodiversity by contributing to the sustainable management and monetization of forestry and water assets.

The report shows that power generation and oil and gas accounted for the majority of 1,741 deals reviewed at an early stage in 2020 for environmental and social risks, while Goldman Sachs evaluated 31 water transactions and 14 forestry-related opportunities.

A $200 million forestry-focused collaboration with Apple announced in mid-April was highlighted in the report as part of its response to clients’ desire for investments that help meet net-zero carbon emissions goals. The strategy involves offsetting unavoidable emissions in Apple’s supply chain by managing Kenyan forestry assets in collaboration with nonprofit Conservation International.

“Nature provides some of the best tools to remove carbon from the atmosphere; the strategy of investing in forestry projects will have the dual benefit of permanently removing carbon from the atmosphere while at the same time generating a financial return to investors from the sustainable harvest of trees,” the report’s authors wrote.

Goldman Sachs declined to comment.

The Sustainable Investing Group that will manage the Horizon Fund is led by Ken Pontarelli, who assumed his New York-based position in October, according to his LinkedIn profile. It shows Pontarelli previously spent two years as founder and chief executive officer of New York-headquartered Mission Driven Capital Partners and 25 years at Goldman Sachs that culminated in four years as chief investment officer for its West Street Energy Partners fund.

In a sponsored piece published in affiliate Private Equity International in November, Pontarelli said personal conviction and the lack of classically trained private equity investors sourcing ESG-focused opportunities inspired him to leave Goldman Sachs and found Mission Driven Capital Partners in 2017.

“I knew the firm’s [Goldman Sachs’] commitment to sustainability was a priority for our executive office,” Pontarelli explained. “I could see that I would have a far greater impact if I re-joined the firm with significant investors and corporate relationships than I could in a third-party firm.”

Pontarelli described his new sustainability group’s investment focus as identical to that of the Horizon Fund, including plans to provide growth capital to businesses with a cost-effective approach to sustainability.

“You need to be able to satisfy both the chief sustainability officer and the CFO, who cares mostly about the bottom line,” he said. “For example, we might finance a company that provides cost-effective substitutes for plastics in packaging – that kind of product would be at the top of the list for every major consumer goods company to help them meet their sustainability objectives.”

The Sustainability report highlights Goldman Sachs’ lead role in a $235 million IPO and $151 million follow-on offering for pasture-raised egg provider Vital Farms.

Its other ag-related investments have included Kenya-headquartered food logistics startup Twiga Foods, California-headquartered dairy alternative provider Ripple Foods, and provision of $300 million towards $900 million for a water-focused fund raised by Renewable Resources Group and the nonprofit The Nature Conservancy. Goldman Sachs was also involved in the assembly of a US farmland portfolio within a REIT called AgCoa, which was sold to the Canada Public Pension Investment Board in 2013.