One of the world’s biggest investment firms is partnering with the New Zealand government to create a $2bn climate infrastructure fund. What’s all that about?

BlackRock. BlackRock. BlackRock…. The more I say it, the less it makes sense. 

That happens to a lot of people. It’s called semantic satiation. BlackRock is a very successful financial investment company, managing trillions of dollars of investment money. 

And I, a humble news consumer from New Zealand, am hearing about this because…?

Because the government has just announced a $2bn investment fund, in partnership with BlackRock, to support renewable energy infrastructure. Through the company’s institutional investors – this money isn’t coming from BlackRock itself but the many institutions that have given it cash to manage – the goal is to make 100% of New Zealand’s electricity renewably generated. At the moment, most of our power comes from hydroelectricity as well as wind farms and solar power, but the grid is topped up by coal. Energy for industrial processes, like turning milk into milk powder and making steel, still uses fossil fuels, and our transport system largely runs on fossil fuels despite the growing fleet of electric vehicles. The government has set an “aspirational” goal of having 100% renewable electricity by 2030. 

The goal is for the initial $2bn to be accelerated by investment from Crown companies and agencies – maybe including the superannuation fund – as well as investments from the private sector to innovate and accelerate decarbonisation. 

Innovation and acceleration, gotcha. I read those words in articles about businesses all the time. But why work with BlackRock? 

Larry Fink, BlackRock’s billionaire owner, likes talking about the environment. He’s been explicit about wanting to invest in businesses with “ESG” (environmental, social and corporate governance) for years, and has said that given the inevitability of climate change, investing in technology that is prepared for the future is good business. This has included pushing other companies to include climate change risks in their disclosures and writing letters to CEOs and governance boards. Fink has described himself as believing in “conscientious capitalism”, using economic measures to improve environmental and social outcomes. 

So he’s a… good billionaire?

BlackRock is trying to put its $10 trillion of managed assets where Larry Fink’s mouth is. For instance, it has said that the fund will no longer invest in companies which make more than 25% of their profit from coal generation, and declares climate and social risks openly. However, this approach has been criticised: the company is still friendly to oil companies and has directed millions of dollars from its ESG funds into fossil fuel companies. It has been accused of hypocrisy and greenwashing. 

There are also doubts about other aspects of the company’s stated ethical values. BlackRock has huge amounts of international investments, including in India and China. Its Chinese investments are currently being investigated by a congressional select committee in the US, which alleges they have profited from companies that make weapons for the Chinese military and are connected to human rights abuses. Chris Hipkins did not answer questions about BlackRock’s links to the Chinese military at the announcement this morning. The company also has funds which invest in defence technology used in other parts of the world, including major defence contractor Lockheed Martin. 

My main way of understanding investments is through my Sharesies account. But it must be different when it involves billions of dollars? 

That would be correct. As the biggest investment manager in the world, BlackRock is massively influential. It’s been categorised as a “shadow bank” – a financial institution that provides bank-like services, like loans and credits, but doesn’t meet the same criteria or require the same regulation that commercial banks get. Financial intermediaries like this, which were exchanging loans irresponsibly, were part of the system that created the mortgage crisis that triggered the global financial crisis in 2007-8. The non-banking finance sector is still in full swing, and according to some, remains vulnerable to a market failure. 

While BlackRock is the world’s biggest investment manager, it’s hardly unique in how it operates – there are many other institutions like it, operating somewhat behind the scenes of the businesses that make it to the news more frequently. 

What’s the nature of BlackRock’s arrangement with New Zealand? 

This is the first country-specific renewable investment that BlackRock has made; it indicates that the company is expecting renewable energy in New Zealand to increase, and increase profitably. The investment, through its climate infrastructure franchise, follows BlackRock’s pre-existing investment of $100m into the NZ energy sector through company SolarZero in 2022. As an investment, it means that BlackRock is expecting a return on this money – it’s not a free gift. Making the announcement in Auckland this morning, Hipkins, energy minister Megan Woods and BlackRock executives were high on enthusiasm and low on details or timelines. Hopefully we’ll get those soon.