Inside BlackRock's multibillion-dollar climate-tech venture

BlackRock and Temasek last week announced they are to team up to form a major new partnership focused on delivering late stage venture capital and early growth private equity investment funds that support the development of a net-zero emission economy by 2050.

Decarbonization Partners brings together two of the world’s largest asset managers in the form of U.S. financial giant BlackRock and Singapore-based Temasek.

The firms said it intends to commit a combined $600 million in initial capital to invest in multiple funds launched by the partnership, including $300 million of seed capital for a first fund aiming to raise a total of $1 billion.

BlackRock and Temasek said they sought to raise third-party capital from investors committed to achieving a net zero emission economy. Reports suggested the venture ultimately could raise up to $5 billion.

Larry Fink, chairman and CEO of BlackRock, said investment in innovative and emerging companies was essential if the world is to meet its climate goals.

“The world cannot meet its net-zero ambitions without transformational innovation,” he said 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.”

His comments were echoed by Dilhan Pillay, chief executive at Temasek International, who stressed that “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,” he said. “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.”

The firms said the new venture would focus on early stage growth companies targeting “proven, next-generation renewable and mobility technology including emerging fuel sources, grid solutions, battery storage, and electric and autonomous vehicle technologies as well as in building and manufacturing sectors to drive decarbonization, resource efficiencies, and material and process innovation.”

The partnership is the latest in a string of moves across the asset management industry to step up investments in clean technologies and low carbon infrastructure following a wave of new net-zero portfolio commitments from leading fund managers.

Late last month BlackRock was amongst a host of top firms to sign up to the Net-Zero Asset Managers initiative, while earlier this month the company launched a number of new climate and environmental, social and governance (ESG) funds.

However, both BlackRock and the wider sector have faced ongoing criticism from environmental groups and some sustainable investors who accuse the industry of largely failing to translate new net-zero commitments into comprehensive strategies to rapidly reduce their exposure to fossil fuel assets. Critics also have highlighted how many ESG funds continue to support carbon intensive firms and do little to mobilize investment in the innovative and disruptive clean tech companies essential for accelerating the net-zero transition.

As such, BlackRock and Temasek’s new venture is likely to be seen as a significant move that could help turbocharge the expansion of the growing band of companies that boast proven clean tech but are struggling to scale up their operations.