Madison Reidy speaks to Charlie Reid and Andrew Landman from BlackRock about their clean energy fund and why they're backing New Zealand. Video / Cameron Pitney / Alyse Wright ...
A couple of weeks ago our Government joined the product launch podium with BlackRock, outlining a big step to “grow our economy andslash our emissions”. The announcement was that BlackRock’s climate infrastructure fund doesn’t exist - but is coming soon – an announcement creating equal amounts of excitement, hope, consternation, and confusion.
There’s no confusion about needing massive multi-decade decarbonisation investment. Making our energy infrastructure “clean” will be disruptive and costly for decades. In dollars, think tens of billions, not billions, from local investors, businesses, Crown entities and offshore capital.
Accepting the need is easy. Not so easy is figuring out BlackRock’s role and what we’ve just endorsed.
BlackRock is a massive US-listed investor managing NZ$14 trillion for clients globally. To understand the scale, BlackRock manages 90x our stock market and 150x all of KiwiSaver.
Their investments range from passive listed share strategies, used by ASB and AMP in their KiwiSavers, through to private-asset investment funds.
Our Government calls this a “first of its kind climate infrastructure fund” to “decarbonise our energy use”. Sounds like a fund we need, although it’s not yet totally clear what it does.
The fund’s name hints at electricity generation by building and managing wind or solar farms using imported kit.
Yet the BlackRock and Government discussion points to earlier stage investment, with emphasis on supporting local ideas, local business growth and “significant export opportunities” from our intellectual property. “Start-up clean tech” is referenced, as is developing green hydrogen capability, which is far from your standard run-of-the-mill infrastructure investment fund.
If BlackRock plans to support these early-stage local ventures, that’s great, which would be higher-risk venture capital rather than infrastructure investment as we normally think of it.
Venture capital and pure infrastructure investment are a million miles apart – each suits different investors and provides different risk/return payoffs. The coming fund launch will reveal exactly which it is.
Funding the climate fund
When the fund launches, BlackRock will attract offshore investors, in the same way it raised US$4.5 billion last year for a global climate-focused infrastructure fund. The Government says it’ll “crowd in investment from Crown companies and entities, including superannuation funds, and private sector funds”, like NZ Super and ACC.
Retail investors may get an indirect slice of the action through their KiwiSaver, which could be a good thing. Large KiwiSaver providers need to do better than their current lacklustre levels of interest in higher-returning “private” (unlisted asset) investments for KiwiSaver investors. Smaller boutique providers like Pathfinder are doing this, and BlackRock could provide an opportunity for large providers to get on board.
BlackRock has partnered with New Zealand. Photo / Getty Images
Contact Energy CEO Mike Fuge is clear our listed power generators aren’t struggling to fund renewable energy projects. They may not, but other ventures would likely appreciate access to more capital.
The BlackRock fund could provide an additional potential source of capital for companies like Lodestone Energy. Lodestone has already raised $150 million in equity, including from Pathfinder’s KiwiSaver, with even more in bank funding. They’re building five solar farms to provide 2 per cent of New Zealand’s electricity needs. More capital for standout clean energy projects and technology feels like a good thing.
Choosing a decarbonisation partner
What was the Government’s selection process, including the assessment of local capability, before standing shoulder to shoulder with BlackRock?
BlackRock ticks boxes as a global player, capable of delivering scale. While you’ll hear many argue BlackRock’s akin to the Death Star, the criticism is largely directed at its influence over large, listed companies. Some argue they’re too woke around climate change, plenty argue the opposite.
BlackRock has massive fossil fuel and clean energy investments. It isn’t here on a mercy mission to decarbonise New Zealand, it’s here to do business and make money for its investors.
BlackRock’s executives say the world needs $200 trillion of decarbonisation investment, being $1 billion every hour until 2050. Hearing that you might think “wow, that’s a massive global challenge”. A large global investor may well think “wow, that’s a massive global investment opportunity”.
Energy Minister Megan Woods said “BlackRock came here because of New Zealand’s ambition”. That’s true, but make no mistake, they will see financial opportunity alongside our ambition.
What we want is investment creating prosperity in a low carbon future for New Zealanders now and generations ahead. We want affordable and reliable low carbon energy systems. To achieve this we need BlackRock (and any investor funding our nation’s infrastructure) to truly understand and contribute to our ambition alongside accessing what they see as “a once in a generation investment opportunity”.
John Berry is co-founder and CEO of Pathfinder.
Disclosure: At Pathfinder we’ve been disappointed with BlackRock’s decision to appoint Amin Naser (CEO of Saudi Aramco) as a director two weeks before announcing New Zealand’s ‘world first’ climate infrastructure fund. For a range of reasons we subsequently sold Pathfinder KiwiSaver’s modest exposure to BlackRock.
