BlackRock, partners eye initial $500 million for climate fund

LONDON (Reuters) – A BlackRock-backed group aims to raise an initial $500 million for a private equity fund that will invest in climate change-linked infrastructure upgrades in emerging markets.

BlackRock will provide the first $100 million of funding for the Climate Finance Partnership (CFP), which was set up in 2018 by France, Germany and the Hewlett and Grantham charitable foundations, the company said in a statement on Wednesday.

The BlackRock funding will go toward a first-loss tranche that will absorb any initial losses, a safety net for other institutional investors which BlackRock expects to help it raise at least another $400 million.

The CFP fund will be invested in renewable energy, energy efficiency, energy storage solutions and ultra-low and electric transport. At least a quarter of the investments would be made in Africa, with the rest in selected countries in South East Asia and Latin America, BlackRock said.

The venture is part of a wide-ranging overhaul of the way BlackRock, the world’s biggest asset manager, is responding to the issue of climate change, as part of a broader commitment to environmental, social and governance-related investing.

In a recent annual letter to the thousands of companies in which BlackRock holds stakes, Chief Executive Officer Larry Fink said the need to act was “particularly urgent” given many cities were not built to withstand “the new climate reality”.

Climate has also been at the forefront of this year’s annual World Economic Forum in Davos, Switzerland, at which news of the planned initial fund-raising is set to be announced.

“We believe creative collaboration is essential to mobilizing investment into climate infrastructure in emerging markets at scale, providing our clients with further opportunity to invest in the global low-carbon transition,” Brian Deese, Global Head of Sustainable Investing at BlackRock, said in the statement.

France and Germany will both invest $30 million of the initial funding, while the William and Flora Hewlett Foundation and the Jeremy and Hannelore Grantham Environmental Trust have pledged $10 million and $7.5 million, respectively.

The CFP members have pledged to help raise the additional seed capital for the fund. BlackRock will invest an as yet determined amount in addition to the funding for the first-loss tranche.

“Emerging market equities are substantially cheaper than those in developed economies and they offer the best choice for growth in an otherwise slow-growth world,” said Jeremy Grantham, Trustee of the Jeremy and Hannelore Grantham Environmental Trust.