BlackRock Unveils Path to Unleashing $4 Trillion Investment Boom
Researchers working inside a unit of BlackRock Inc. estimate that a reform of public financial institutions could free up as much as $4 trillion in additional investment to help emerging markets tackle the fallout of climate change.
In a paper published on Tuesday, the BlackRock Investment Institute laid out how it thinks a reform of multilateral development banks (MDBs) such as the World Bank might allow them to make better use of the capital at their disposal. Doing so would play a key role in filling the so-called climate financing gap that emerging markets currently face, BlackRock said.
The proposal comes just days before the COP28 climate summit gets underway in the United Arab Emirates. BlackRock Chief Executive Officer Larry Fink, who skipped the 2022 summit in Egypt, is on this year’s COP advisory committee and will be joining the talks in person in Dubai. The world’s largest asset manager has identified the global transition to a low-carbon economy as one of five “mega forces sweeping markets and economies.”
But nations experiencing the fastest increase in emissions are also those facing the biggest hurdles when it comes to accessing private capital. With that in mind, a key goal of the COP28 talks will be to come up with so-called blended finance models, whereby private investors get incentives to join public institutions in committing capital to climate projects, without the terms becoming too onerous for debtor nations.
For now, private investors face several financial disincentives, BlackRock said. “High levels of public debt in many EM countries makes attracting foreign direct investment into energy or climate resilience sectors more difficult, we think.”
MDBs, which were first created to help rebuild a war-ravaged Europe in the 1940s, are being reimagined for the era of climate change. Prominent voices calling for reform include US Treasury Secretary Janet Yellen, French President Emmanuel Macron and Barbados Prime Minister Mia Mottley, with demands for a meaningful overhaul set to play a major role during COP28 talks.