BlackRock has achieved a US$673 million final fund-raise for the Climate Finance Partnership (CFP), a flagship public-private vehicle, managed by BlackRock Real Assets’ Global Renewable Power team, that focuses on investing in climate infrastructure across emerging markets (EM) with the goal of accelerating the global transition to a net-zero economy.
A global consortium of 22 investors, including governments, philanthropies and institutional investors, committed to the fund-raise, which was oversubscribed and exceeded its target of US$500 million.
The BlackRock Investment Institute estimates that the world needs to invest US$1 trillion annually into low-carbon projects in developing countries to achieve a just transition to a net-zero global economy. This is because EM account for an increasingly large share of global emissions due to population growth and economic development.
However, in 2020 only a total of US$150 billion was invested in decarbonization in EM, excluding China – a sixth of what is needed. Through the CFP, the public and private sectors have come together to mobilize significant investment into climate infrastructure in EM that seeks to deliver positive environmental and social impact and allow for attractive risk-adjusted returns.
The CFP employs a unique blended finance structure with a total of US$130 million in catalytic capital raised from the governments of France, through the French Development Agency; Germany, through KfW Development Bank; and Japan, through Japan Bank for International Cooperation; together with the Grantham Environmental Trust, the Quadrivium Foundation and another private foundation; and multi-energy company TotalEnergies.
This catalytic capital seeks to insulate investment risks for institutional investors in the fund and was used to mobilize a broader institutional fundraise totalling US$523 million from investors, including AXIS Capital, AP2, AXA, Dai-ichi Life Insurance, E.ON, Finnish Church Pension Fund, Mitsubishi UFJ Morgan Stanley, Mizuho Bank, MUFG Bank, the Richter Family Office, Standard Chartered Bank, Sumitomo Life, and a leading European pension fund. BlackRock committed US$20 million to the CFP.
“Achieving a just transition to a net-zero economy by 2050 requires long-term planning and close coordination between the public and private sectors,” says Larry Fink, chairman and CEO of BlackRock. “This partnership is proof that governments, philanthropic organizations and institutional investors can come together to mobilize capital at scale into EM, which are most exposed to the impact of climate change.”
The CFP will target investments in select non-Organization for Economic Cooperation and Development (OECD) countries in Asia, Latin America, and Africa. These regions present significant investment opportunities for global investors in climate infrastructure over the coming decades due to significant growth in electricity demand, increasing urbanization and rapid economic development.
Renewable energy in non-OECD markets are projected to make up 49% of global energy capacity by 2050, compared with 25% for the OECD renewable market. The fund’s focus on the climate infrastructure sector includes grid-connected and -distributed renewable power generation; energy efficiency in residential, commercial and industrial sectors; transmission or energy storage solutions; and ultra-low emission or electrified transportation and mobility services.
The CFP fund managed by BlackRock Real Assets’ Global Renewable Power team is led by David Giordano, global head of renewable power. BlackRock Real Assets manages approximately US$12 billion of invested and committed capital in renewable power and over US$40 billion in client assets across all infrastructure strategies spanning equity, debt and listed strategies as of June 30 2021. The Global Renewable Power platform has invested directly in over 300 projects, including onshore wind, offshore wind and solar photovoltaic projects.
