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Major US financial institutions plan for trillions in sustainability investments

16 April 2021 Kevin Adler

JPMorgan Chase, the largest bank in the US, said on 15 April it plans to invest more than $2.5 trillion over 10 years to advance climate action and sustainable development, joining other major US investment houses such as Bank of America and Morgan Stanley in making trillions of dollars of pledges.

Also, in the last few weeks BlackRock, the world's largest asset manager, announced a series of investment funds to expand its cleantech activity.

With the US soon to join the EU in setting goals to decarbonize the economy, investment firms are tapping companies and technologies that will forge a path to net zero (see related article).

IHS Markit expects global capital spending in the renewable power sector in 2021 will rise 8.5% year on year to $255 billion, basically a bounceback year after the COVID-19 pandemic. But spending will increase. IHS Markit expects $1.3 trillion of renewables capital investment from 2021 through 2025.

JPMorgan Chase said in a statement that its target includes $1 trillion for renewable energy and clean technology investments, as well as development finance and community development. The bank has pumped nearly $210 billion into such projects since 2016, it added.

Last year, the bank established the JPMorgan Development Finance Institution to grow development finance activities and attract additional investment to the emerging markets.

"These new efforts will help create sustainable economic development that leads to a greener planet and critical investments in underserved communities," said Jamie Dimon, CEO of JPMorgan Chase. "Business, government, and policy leaders must work together to support long-term solutions that advance economic inclusion, bolster sustainable development and further the transition to a low-carbon economy. We are committed to doing our part."

Bank of America

Bank of America, the second-largest bank in the US, said 9 April it will mobilize $1 trillion by 2030 to accelerate the transition to a low-carbon economy. That takes its total green financing goal to $1.5 trillion under its Environmental Business Initiative.

"Bank of America's broader $1.5 trillion sustainable finance target is consistent with the United Nations Sustainable Development Goals [SDGs], and will spur transformative change nationally and around the world," it said. "Beyond the $1 trillion climate-related finance, the balance of the sustainable finance goal is focused on social inclusive development, scaling capital to advance community development, affordable housing, healthcare and education, in addition to racial and gender equality."

In February, Bank of America outlined steps to achieve net-zero GHG emissions in its financing activities, operations, and supply chain before 2050.

Morgan Stanley

On 13 April, Morgan Stanley pledged to raise $750 billion by 2030 for sustainable development. That is a three-fold increase from the bank's initial commitment of $250 billion announced in 2018.

"The firm will achieve this commitment through increased activities such as cleantech and renewable energy finance, green bond financing, and other transactions that enable a transition to a low-carbon economy," Morgan Stanley said in a release.

The company's enhanced commitment is part of a larger goal of mobilizing a total of $1 trillion in support of the UN SDGs by 2030. "We are tripling our low-carbon commitment and increasing our SDG goals for the simple reason that there is no time to waste. As a leader in sustainable finance, it is our obligation to do more to support businesses, governments, and individuals in securing a more sustainable world for future generations," Morgan Stanley Chief Sustainability Officer and CEO of the Institute for Sustainable Investing Audrey Choi said.

Morgan Stanley has mobilized $80 billion across the firm in the first two years of its low-carbon financing commitment, and like Bank of America it has a goal of net-zero carbon emissions in its financing by 2050.

BlackRock

BlackRock, which manages about $8.7 trillion in assets, has announced a series of initiatives in the last month in clean power and emissions reduction.

On the institutional investor side, BlackRock said 8 April it raised $4.8 billion for a new fund to invest in renewable power projects and existing assets around the world. It had announced a goal of raising $2.5 billion, but said demand from more than 100 institutional investors exceeded its expectations.

The new fund will be the third by BlackRock Real Assets to operate in renewable energy, but it's more than double the combined size of the previous two ($2.2 billion). The fund's initial focus will be wind and solar assets in Europe, the US, and Asia Pacific, said Chief Investment Officer Jim Barry.

A few days later, BlackRock announced that its new exchange-traded fund (ETF) for institutional and individual investors that targets the low-carbon economy attracted more than $1.2 billion on its first trading day, 8 April. This made the BlackRock U.S. Carbon Transition Readiness ETF the largest ETF launch ever, it said.

A second ETF debuted on the same day, the BlackRock World ex U.S. Carbon Transition Readiness ETF, which received about $500 million in first-day investment, BlackRock said.

"Winners and losers will emerge in every sector based on each company's ability to adapt, innovate and pivot their strategies toward the low-carbon economy," said Larry Fink, CEO of BlackRock, in a statement. "Many of our clients share this conviction and we are helping them be at the forefront of the energy transition through next generation climate analytics and sustainable strategies."

The new ETFs will invest in large- and mid-cap companies that BlackRock believes are better positioned to benefit from the transition to a low-carbon economy, the company said.

On the debt side, BlackRock said in a commentary on 5 April that sustainable exchange-traded products globally attracted record cumulative inflows of $87 billion in 2020, and this year should exceed that figure significantly.

A few days after the ETFs debuted, BlackRock and Singapore's sovereign wealth fund Temasek Holdings announced a partnership to invest in companies and technologies that reduce emissions. The firms said in a joint statement on 13 April that they are committing $600 million to Decarbonization Partners, which has a fundraising target of $1 billion for its first fund.

The funds will be invested in companies with proven renewable and mobility technologies such as emerging fuel sources, grid solutions, battery storage, and electric and autonomous vehicle technologies. "The world cannot meet its net-zero ambitions without transformational innovation," Fink said. "For decarbonization solutions and technologies to transform our economy, they need to be scaled."

Both BlackRock and Temasek have set goals of net-zero emissions in their investment portfolios by 2050.

BlackRock and Vanguard Group joined the Net Zero Asset Managers Initiative on 29 March, which now has more than 70 international asset managers that manage more than $32 trillion. The members set interim emissions targets for 2030 and pledge to achieve net-zero emissions across their investment portfolios by 2050.

As an example of a new cleantech investment made by BlackRock through one of its existing funds, it teamed up with oil company Valero Energy and technology company Navigator Energy Services to build an industrial-scale carbon capture pipeline system across five Midwest states that could permanently sequester up to 8 million mt of CO2 annually. The project could start operations in 2024, the partners said 16 March.

The partners will install 1,200 miles of pipeline to gather CO2, which would be delivered to a central sequestration facility, probably in southern Illinois, where it will be injected into an underground geologic formation.

Based on reporting by Abdul Latheef and Jeremy Rakes, OPIS.

Posted 16 April 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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