Net-Zero Fund Offers ‘Last-Mile’ Model for Decarbonisation

Earlier this month, BlackRock launched a NZ$2 billion fund targeted at investing in New Zealand’s climate infrastructure, as ESG News Asia reported.

The public-private investment scheme was created by the global investment company on behalf of the country’s institutional investors, as well as the New Zealand government.

According to a new Sustainable Fitch report, the first-of-its-kind climate infrastructure fund is a funding model that can be replicated in other developed economies to supplement areas of their decarbonisation plans.

Sustainable Fitch adds it also offers a roadmap model for collaboration between the public and private sectors to navigate the energy transition.

BlackRock will aggregate and manage investments from private-sector funds, New Zealand Crown companies, and superannuation funds. The NZ$2 billion fund will then provide access to greater pools of capital for New Zealand businesses, supporting the creation of highly skilled local jobs and will accelerate green energy options such as solar, wind, green hydrogen, and battery storage to fuel a low emissions economy.

Quicker Decision-Making

Sustainable Fitch says having a single investment manager managing the distribution of a nationally focused climate transition fund will streamline decision-making processes and allow for more nimble capital allocation.

The public-private investment scheme will also complement existing efforts in New Zealand to reduce reliance on fossil fuels and hasten the pace of decarbonization. As a result of these developments, Sustainable Fitch says it expects to see a pick-up in activity in climate-related project financing.

BlackRock’s approach of a dedicated single-country climate fund also offers a public-private investment strategy for politically and economically stable countries that are more advanced in their decarbonisation journeys.

This operating model is focused on developed countries with ‘last-mile’ climate efforts, such as achieving full reliance on renewable energy. In the case of New Zealand, renewable energy accounts for more than 80% of electricity supplied to its grid, with a goal to raise that to 100% by 2030.

Sustainable Fitch points out however this funding approach may not be immediately applicable to or easily replicated in emerging markets, where the majority of climate financing requirements are in demand because these markets could see increased risk from political, social, or market instability.

Legal frameworks aimed at protecting investor interests are also still growing in these jurisdictions. As a result, a single asset or investment manager may not be as prepared to undertake the associated investment risks.