The French and German governments have joined forces with fund managers to speed up the fight against global warming. French President Emmanuel Macron and the head of fund management giant BlackRock, Larry Fink, announced the plan in New York on Wednesday at the “One Planet Summit,” a green forum launched in 2017 to help offset the impact of the US pulling out of the Paris climate accord.
Governments and philanthropic foundations could provide initial funding of up to $100 million (€85 million) to kick-start the fund, said financial sources. Institutional investors such as pension funds, insurers, sovereign wealth funds and family offices could then contribute a multiple of that sum which would be invested in renewable energy and low-emission transport projects in emerging economies in Asia, Africa and South America.
Southeast Asia is to be a focus for investment because it’s home to innovative companies that will be able to drive change towards clean energy, said Michael Bloomberg, founder of the Bloomberg media company and a former mayor of New York. Foundations standing by to contribute include the Ikea Foundation, the Hewlett Foundation and the Grantham Foundation, founded by British fund manager Jeremy Grantham.
BlackRock will manage the money and gather further investors, said one insider. The UN estimates that the world lacks some $1.5 trillion in investment a year needed to achieve the climate goals enshrined in the Paris agreement.
It will take some six months to sort out details such as how much the founding members will invest and how high BlackRock’s administrative fees will be. BlackRock’s own Global Renewable Power II fund could serve as a blueprint for the venture. Launched in 2017, it collected $1.65 billion from 67 institutional investors in Asia, Europe and North America and has so far invested in more than 250 wind and solar plants.
It’s unclear what returns the new fund aims to achieve but there’s no doubt that its goals are ambitious.
Environmentalists make better money managers
“Classic impact investing always involves forgoing part of the return for the sake of investing in something sensible. Here we don’t really want such a trade-off on returns,” said one of the organizers. With renewable energy projects investors typically expect returns of between 5 and 7 percent, said one money manager.
A JP Morgan study concluded that so-called ESG investments (short for environment, social, and governance) didn’t yield lower returns than others because socially responsible companies tend to be better managed.
The bank estimates that some $23 trillion in managed assets worldwide respect ESG criteria in some form, while only $2.5 trillion systematically integrate ESG in the investment process. Only $108.3 billion is invested in dedicated ESG funds.
The “One Planet Summit,” organized for the first time in 2017 by Mr. Macron and Mr. Bloomberg together with UN Secretary-General António Guterres and World Bank chief Jim Yong Kim, has the feeling of a protest meeting on the sidelines of the UN General Assembly underway in New York.
Astrid Dörner is a New York correspondent for Handelsblatt. Silke Kersting covers environmental policy for Handelsblatt from Berlin. Peter Köhler is a Handelsblatt editor in Frankfurt, reporting on banks, private equity firms, venture capital and corporate funding To contact the authors: email@example.com, firstname.lastname@example.org, email@example.com