The $9 trillion financial management firm Blackrock is collaborating with the $313 billion Singapore investment firm Temasek to back companies developing technologies and services to help create a zero-emission economy by 2050.
The two mega-investment firms will invest an initial $600 million to launch Decarbonization Partners, and look to raise money from investors committing to achieving a net zero world and long-term sustainable financial returns. The two partners have set themselves a goal to raise $1 billion for their first fund, including capital from Temasek and BlackRock.
The partnership, coming during Earth month, is one of several big multibillion-dollar initiatives that are underway to prevent global climate change caused by greenhouse gas emissions.
Indeed, BlackRock is somewhat tardy to the party. Temasek, for its part, has already made a number of high-profile bets in the alternative meat market -- namely in companies like Impossible Foods -- and in alternative energy technology developers including Eavor, a geothermal company, and a $500 million bet on a renewable power developer in India.
Meanwhile, a coalition of billionaires led by Bill Gates is already on their second billion-dollar investment vehicle through Breakthrough Energy, a multi-stage, multi-strategy initiative that includes a venture capital arm as well as other types of financing on the way.
“The world cannot meet its net zero ambitions without transformational innovation,” said Larry Fink, chairman and CEO of BlackRock, in a statement. “For decarbonization solutions and technologies to transform our economy, they need to be scaled. To do that, they need patient, well-managed capital to support their vital goals. This partnership will help define climate solutions as a standalone asset class that is both essential to our collective mission and a historic investment opportunity created by the net zero transition.”
To get a sense of what Decarbonization Partners might back, companies should probably look to the Breakthrough Energy portfolio -- the firms share similar interests in new sources of energy, technologies to distribute that energy, building and manufacturing technologies and material science and process innovations.
It's a big swing that the firms are taking, but the flood of capital coming into the sustainability sector is commensurate with both the size of the problem and the potential opportunity in returns generated by solving it.
A report from Morgan Stanley estimated that solving climate change would be a $50 trillion problem, according to a 2019 report from Forbes.
“Bold, aggressive actions are needed to make the global net zero ambition a reality. Decarbonization Partners represents one of several steps we are taking to follow through on our commitment to halve the emissions from our portfolio by 2030, and ultimately move to net zero emissions by 2050,” said Dilhan Pillay, chief executive officer of Temasek International. “Through collective efforts with like-minded partners, we will be able to create sustainable value for all of our stakeholders over the long term, and investors will have the opportunity to help deliver innovative solutions at scale to address climate challenges.”