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 ...
When Dame Jacinda Ardern made an elevator pitch to powerful US businesspeople in BlackRock’s New York boardroom in May last year, Larry Fink was suitably impressed.
Fink leads the world’s biggest investment fund, which has US$9.4 trillion ($15.6 trillion) of assets under management, with projections that it will exceedUS$15 trillion in five years’ time, according to Morgan Stanley.
He was attracted by the simplicity of Ardern’s messaging — and undoubted star power — and New Zealand’s commitment to moving further towards 100 per cent renewable electricity.
A seed was sown, which finally came to fruition this week with the announcement that BlackRock would launch a $2 billion climate infrastructure fund to invest in private-sector solar, wind, green hydrogen and battery storage technology assets.
“This is the largest single-country low-carbon transition investment initiative BlackRock has created to date,” Fink spruiked on a LinkedIn post.
That was the cue for Prime Minister Chris Hipkins to effectively co-announce the move. It was PR all around for BlackRock, which is, after all, a major investor in fossil fuels, regardless of Fink’s recent chafing at the weaponising of ESG investments which he previously championed.
Let’s be clear. BlackRock still has to raise the $2b. It will be using the pitch that the fund’s investments will be focused on making New Zealand “the first country in the world with 100 per cent renewable electricity”.
At first blush, this is not too large a stretch given that New Zealand already has a low-emissions power system with 80-84 per cent of electricity coming from renewable sources.
In April, the International Energy Agency (IEA) noted this share could easily surpass 90 per cent based on existing policies. But the electricity system would need to adapt to upcoming changes, notably the integration of greater shares of variable renewables such as wind and solar. The problem is that the system is heavily reliant on hydropower and any lower-than-expected outputs in dry years are a clear risk.
The question is whether the marginal cost of getting to a 100 per cent renewable electricity system is just too expensive. Particularly when the major challenge of decarbonising transport may be a more worthy target for investment.
The two are not mutually exclusive.
Notably, National’s Chris Luxon has applauded the move (not stupid, as if his party wins the election his Government would benefit). But while Luxon has applauded the fund, he has also said the world is awash with investment capital.
The challenge in front of the sector is the time it takes to consent projects.
Under National, there would be a one-year consenting timeframe for renewables, which Luxon contends would double the number of projects.
BlackRock CEO Larry Fink.
The IEA appears to be in accord. It has recommended advancing reforms to the permitting system for new renewable projects, finalising an offshore wind regulatory framework and providing timely clarity on the government-backed NZ Battery Project for pumped hydro.
IEA executive director Fatih Birol reckons New Zealand has the potential to be a global pioneer on integrating very high shares of renewables while maintaining energy security.
Birol says the NZ Battery Project can demonstrate the role of pumped hydro storage in balancing a nearly 100 per cent renewables-based grid. And government-backed investments to decarbonise industrial heat, for sectors like chemicals and pulp and paper, can also unlock important emissions-reduction solutions for the world.
The report, however, concludes that New Zealand needs to place a stronger focus on decarbonisation of transport — which is today almost entirely dependent on oil — both through electrification and biofuels.
And that is the rub.
When the BlackRock meeting originally popped up on Ardern’s itinerary, there was scepticism that Fink would front. Those who were credulous discounted the pull of former US Chamber of Commerce vice-president and head of international affairs Myron Brilliant, who co-hosted the meeting with Fink.
Some advisers had wanted to crowd out Ardern’s itinerary by pimping her out too much to travel media. That was particularly so given that Air New Zealand’s direct flights to New York were due to start within months.
Jacinda Ardern leaving BlackRock prior to talking to the media. Image / Newshub
But the Prime Minister’s Office also wanted her in front of US business heavyweights so she could promote New Zealand as an investment destination and assist in leveraging the US capital markets.
That was something which was desperately needed after the Covid years and a view from some connected Americans that New Zealand had become too constrained by the multiple lockdowns.
In the background, officials were also having to deal with Joe Biden’s people. The upshot was that like other political leaders before her, Ardern had to cool her heels Stateside until the White House found the right time slot for them to meet.
Trying to host a major business networking event in DC was just too problematic.
So when the call went out to Brilliant, he readily agreed to make the investment meeting happen.
Brilliant has had a lengthy connection with the Kiwi tribe in DC.
He was in Christchurch for a United States New Zealand partnership Forum in February 2011, when the devastating earthquake struck. So too, a pantheon of major US players including Kurt Campbell (back in the White House) former Iraq ambassador Chris Hill and former US deputy secretary of state Richard Armitage.
New Zealand needs to foster these international business connections.
Sir John Key’s Government also put New Zealand on the international map when it launched the mixed ownership model and partially privatised a number of government-owned electricity generators.
Staying in the sweet spot during recessionary times is not an easy ask.
With Ardern now out of politics, this was not the week for a public victory roll. (Hipkins did that.)
She was in Canberra this week for a Mana Wāhine event celebrating women in leadership across politics, the arts and sport who are breaking barriers and helping level the playing field for future generations.
Then there were the three events hosted by Business Chicks Australia.
However, Ardern can chalk up the BlackRock deal as a success.
