Goldman Sachs has an ESG strategy to avoid hedge fund attacks.

Oct 12
One sort of ESG asset has what it takes to withstand such challenges, according to the president of Goldman Sachs Group Inc.'s fund management group, as short sellers target typical green equities that are struggling with inflation.

John Goldstein, global head of sustainable and efficient asset and wealth management solutions at Goldman, claims that his team is looking at businesses that enable more effective resource utilization to lessen the impact of inflation. This idea is rooted in the so-called circular economy, which places a strong emphasis on recycling and waste management.
A growing number of asset managers believe it's time to look at what has been referred to as the second stage of the energy transition as investors increasingly look beyond conventional renewable energy as profit margins are squeezed by inflation and supply chain bottlenecks and as hedge funds prepare for even bigger losses in clean energy stocks.

"Part of this strategy involves looking for companies with business models that allow them to use less virgin material to create things or save money from day one," Goldstein stated.

The circular economy concept is already being incorporated into fund strategies by some of the biggest asset managers in the world, including BlackRock Inc.
A developing array of regulations supports these investments. As a result, the European Commission, the executive branch of the EU, is constantly upgrading its circular economy action plan as the bloc's policies incorporate demands for improved resource management.

During this time, bets on conventional green stocks have grown in popularity, and substantial sell-offs have been fueled by hedge funds' short holdings. Currently on course for its worst year since 2011, the S&P Global Clean Energy Index will drop more than 28%.

According to data provided by Morningstar, the fund sector has, overall, increased its involvement in the circular economy theme more than 300 times since the year began, and the strategy now includes 25 funds managing a total of more than $6 billion. Impact strategies and ESG funds, which are not devoted to the issue, are not included in these figures.

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