Blackrock CEO and chairman Larry Fink rallied for more public-private investment in emerging markets’ climate infrastructure today, after the world’s largest asset manager raised a target-beating $673m fund to do exactly that.
The asset management giant secured backing from the French, German and Japanese governments as part of the fundraise, which was oversubscribed and exceeded its $500m target.
Dubbed the Climate Finance Partnership (CFP), Blackrock called the new fund a “flagship public-private finance vehicle”, which it hopes will set a precedent for governments and private companies teaming up to mobilise capital in emerging markets to fight climate change.
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This type of blended finance model has been a hot topic at this year’s COP26 conference in Glasgow, where Blackrock CEO Larry Fink told the simultaneous Green Horizon Summit today: “We could have raised a lot more, and this is a great example of leveraging what public capital can do.”
“It’s essential that the private and public sector come together to share the risks of addressing sustainability in the emerging world,” Fink said.
He also suggested that governments should consider reforming institutions like the World Bank and IMF to enable more private sector lending.
Although the last year has seen several multibillion renewable energy funds raised for the transition to net zero, these have largely overlooked emerging markets and instead focused on richer countries that pose lower risks to investors.
Public bodies, including the three state-owned development banks, French energy company TotalEnergies, and philanthropic institutions the Grantham Environmental Trust and the Quadrivium Foundation, contributed 20 per cent of the fund’s capital ($130m) and have agreed to take losses before other investors.
BlackRock committed $20m to the CFP fund.
“Not enough private capital is being invested in the emerging world today because of the amount of risk involved with governance,” Fink told the COP26 panel.
“But if we’re serious about addressing climate change, the biggest equity owners – all the major developed countries in the world – need to rethink the charter and focus on mitigating some of these risks,” he said.
The Blackrock CEO and representatives from the fund’s other backers are rallying for more support for such initiatives that focus on tackling climate change in emerging markets at COP26.
Emerging economies, including countries across Latin America, Africa and Asia, will need around $1tn investment a year to help them also transition to a low-carbon economy by 2050, according to Blackrock’s Investment Institute.
As it stands, just $150bn was invested in these economies in 2020 – a sixth of what the asset manager calculates is needed.
“Finance drives everything, but we have to move beyond just finance to get this done,” Fink said.
“Investing in emerging markets is the only way we will get a fair and just transition, otherwise we’ll create more political uncertainty and an emerging world that can’t join us in the net zero transition because they can’t afford it,” he said.
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