New Zealand teams up with BlackRock in bid to unlock for almost £1bn climate action

Pictured: Te Apiti Wind Farm, Woodville, NZ

The US-based financial giant has described the strategy as “country-led”. It has been created to help New Zealand’s Government in achieving its environmental goals including a 100% renewable electricity mix by 2030 and its commitments under the UN Biodiversity Treaty.

At present, New Zealand’s electricity mix is around 83% renewable. The nation estimates that getting it to 100% will require billions of dollars – with more to be spent on grid upgrades and energy storage than on power generation.

Target investment areas for the new BlackRock strategy include wind, solar, energy storage and grid infrastructure.

Beyond electricity decarbonisation, the strategy also covers electric vehicle (EV) charging infrastructure and green hydrogen, which is manufactured by electrolysing water in processes powered by renewable electricity.

Hydrogen is regarded as key to decarbonising hard-to-abate sectors like heavy industry and shipping, as it produces no greenhouse gas emissions at the point of combustion. But, at present, most global hydrogen production is ‘grey’. Grey hydrogen production is fossil-fuelled and, as such, the hydrogen has high life-cycle emissions. Many nations with net-zero targets are now fleshing out plans to rapidly scale cleaner alternatives.

The final focus sector for the new strategy is natural capital. New Zealand updated its Aotearoa Biodiversity Strategy in 2020 with additional input from Indigenous communities and with more ambitious targets. It subsequently signed the UN’s global treaty to halt nature loss this decade and promote restoration at scale.

Creating natural capital projects can help to funnel private investment into nature-related projects that previously may not have been investable. Past challenges have included long payback times and non-financial benefits, plus outdated risk management processes.

Attracting investors

BlackRock will operate the new strategy under its Climate Infrastructure franchise. Like other parts of the franchise, which has been running since 2012, the strategy will be open to private sector entities seeking additional capital to build or expand low-carbon infrastructure and/or nature-based solutions.

BlackRock’s co-head of climate infrastructure in the Asia-Pacific region, Charlie Reid, said the new fund will give institutional investors a smoother pathway to participating in New Zealand’s rapidly growing climate finance ecosystem.

The firm’s chair and head of the Asia-Pacific region, Rachel Lord, said: “This pioneering initiative between BlackRock and New Zealand is a powerful example of the public and private sectors joining forces to mobilise capital and help a country achieve its energy transition goals. We believe New Zealand is at the forefront of low-carbon transition, and investors will benefit from the opportunities it creates.”

New Zealand’s Prime Minister Chris Hipkins said that the fund “demonstrates the huge economic potential” of the low-carbon transition.

Hipkins said: “Cyclone Gabrielle and the Auckland floods were reminders we must speed up our own climate action, and the fund will super charge investments in clean technology that might otherwise not have happened.

“I’m absolutely stoked about what this means for Kiwi ingenuity in renewable energy; it shows that our ambitious climate targets have the world’s attention, and that they are good for the climate, good for the economy, and will help create highly skilled jobs.”

It bears noting that, just last week, BlackRock was one of several asset managers to be accused of dialling back its climate finance focus amid anti-ESG pressures in many US states.

InflenceMap gave BlackRock a lower stewardship and governance rating this year than last. Other large US-based firms including Goldman Sachs, JP Morgan, State Street and Fidelity Investments also fared poorly.

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