From new technologies to traditional infrastructure, BlackRock’s alternative investment arm is positioning itself to fund the energy transition, whatever industry it may come from.

The asset management giant, which has $10tn (€9.5tn) in assets and is one of the largest index fund providers, is a shareholder in many of the world’s biggest businesses, including those targeted by climate activists and green investors, such as oil and gas companies and automotive stocks. 

It also runs the £171m BlackRock Energy and Resources Income (BERI ) investment trust, which has successfully invested in both sides of the move to a carbon neutral world and generated a 112% total shareholder return over three years. This year the shares are up 31% and stand on a 9% premium over asset value.

But through its alternative investors division, the group wants to be a provider of capital to these types of businesses to facilitate their transition, according to global head Edwin Conway (pictured).

‘We’re hoping to bring them private capital to be a catalyst for their change, because - for those who are not changing - the end client has a choice today. Their business model will be under increased pressure should they not change,’ he told Citywire at the SuperReturn conference in Berlin.

BlackRock last week announced the launch of a new open-ended infrastructure fund to drive the global energy transition by investing in utilities, renewable energy assets, battery storage systems and grid digitisation technologies, among others.  

It also partnered with Singaporean sovereign wealth fund Temasek in January 2022 to set up Decarbonization Partners. This involves committing $600m in initial capital combined, while the first fund under the strategy is targeting $1bn.

The purpose of the strategy is to fund innovative new companies through late-stage venture investing. Investments include Group14 Technologies, a manufacturer of advanced silicon-carbon technology for lithium silicon batteries; and MycoWorks, an animal-free leather producer.

With the variety in its strategies, BlackRock is aiming to have the capital to both fund new technologies and work with incumbents.

For example, in the automotive industry it participated in a €700m investment into electric vehicle charging network provider Ionity alongside Porsche and other car manufacturers.  

Within the energy sector, Conway said the group has worked on carbon capture and sequestration.

‘We think natural gas is a huge part of the positive catalyst to the transition because this is going to take decades, as opposed to single years. The work we’ve done with large energy companies to bring private capital to support their transition in carbon capture, in sequestration, in natural gas, is very real,’ he said.

‘I think society has spoken up and said it wants a different path forward and the future needs to be different than the past and we’re trying to make sure it happens. That road to the new future is patient and it will be uneven. But in the absence of these energy companies, this whole transition is under threat.’

Growth in private credit market

BlackRock manages approximately $330bn in alternatives, with $75bn of that in real assets.

It runs strategies across the private markets, including private equity, Conway believes there will be disproportionate growth in infrastructure and private credit.

Every single client type is looking to allocate more to private credit, driven by shortfalls in yield and increased uncertainty, he said.

‘We’re seeing a big spike in interest there, particularly with inflation and the interest rate environment,’ he added.

Meanwhile, given the range of the firm’s capabilities, Conway also sees the wealth segment making up a more significant portion of BlackRock alternative investors. Currently only around 13% of the division’s assets come from this client segment, through single and multi-family offices, or private banks.