The BlackRock logo is seen outside its office in New York City.
Brendan McDermid | Reuters
Black stones estimates that the world's green energy transition will require $4 trillion annually by the mid-2030s, calling for increased public-private partnerships, especially in Asia-Pacific.
This forecast comes from BlackRock's latest “Investment Institute Transition Scenario,” which analyzes how the low-carbon transition is most likely to unfold and its potential impact on investment portfolios.
According to Michael Dennis, head of APAC Alternative Strategies & Capital Markets at BlackRock, the $4 trillion figure is double previous expectations of $2 trillion annually and will require capital increases across the public sector as well. and private.
“APAC is truly at the heart of the energy investment opportunity and we see this across many sectors, both in developed markets and in emerging markets,” Dennis said at Singapore's annual Eco Week last week. emerging school”.
Is the capital out there?
Last year, $1.8 trillion was invested in projects related to the energy transition, up from $33 billion in 2004 with about $19 trillion invested to date, according to data compiled by BlackRock compiled.
“Growth and investment volumes are moving in the right direction,” said Dennis, who is responsible for BlackRock's alternatives business in the region.
“However, while investment is increasing, there is still an $18 trillion gap to reach the target we need by 2030,” he added.
The capital gap exists across different types of risk: from low-risk investments in core energy infrastructure to higher-risk endeavors such as late-stage venture capital and private equity .
According to Dennis, funding to fill this gap is currently available.
ONE BlackRock survey of 200 institutional investors last year found that 56% plan to increase their transition allocation over the next one to three years, with 46% saying that navigating the transition is the most important investment priority of them during the same period.
However, making investments a reality in private and public markets will require “alignment between government action, companies and community partnerships,” Dennis said.
Regarding public policy, legal regulations such as Inflation Reduction Actsigned in August 2022 in the United States, has been able to mobilize billions of dollars in public funds to invest in projects to reduce the greenhouse effect.
“In addition, we need to see policy change around energy pricing and deregulation of energy markets,” said Dennis, adding that in emerging markets, approximately 60% of the required capital is expected to come from the private sector.
BlackRock identifies blended finance as another important investment driver, especially in emerging markets. Blended finance is defined as the strategic use of development funds to mobilize additional finance for sustainable development, according to OECD.
“Blended finance is really important, not only for the early stages of the project but also for implementation [green] investable assets within the current portfolio structure,” Dennis said, adding it could help unlock trillions of dollars in funds from the broader capital markets.
According to BlackRock, other factors needed to achieve the world's green finance goals include better talent development across different sectors of the ecosystem and changing the risk framework when investing in green project.
