Goldman Sachs, Blackrock, Blackstone, and TPG
The list is long and getting longer by the day – investment and asset managers around the world are waking up to the biggest opportunity in the next decade – sustainable investments. We’re not surprised by this; in fact, it’s a welcome shift in the press coverage of the thesis. While we’re cautiously optimistic, this isn’t to be viewed as a successful campaign in aligning assets with the goals of sustainability, but rather merely the end of the opening exchange as we move into the mid-game.
$750 Billion – that’s a big number even by today’s standards. And it’s the headline number that Goldman Sachs used last year when it announced its formation of a sustainable finance unit. When you peel the onion back, it’s $75B a year for the next 10 years and any and all activities which touch sustainability will count towards that number. While the Wealth Management arm raised $2B for solar and wind investments, the vast majority of this touted activity will come in the forms of project finance and investment banking and are primarily reactive rather than proactive.
Larry Fink, CEO of Blackrock, has been a proponent of these proclamations since 2016. And again in 2017. But the actual allocations tell a different story, and that’s why we’re only cautiously optimistic. On the one hand, Blackrock announced the closing of $1B towards a $2.5B project fund focused on solar, wind, and energy storage – which is great. But let’s consider this in the broader context – Blackrock has $6.96 TRILLION under management so on a percentage basis, their commitment to renewables isn’t significant. Even worse, they carry about $17.5B in exposure to coal companies and projects in their portfolios.
According to The Global Coal Exit List, “BlackRock is not only the largest investor in companies developing new coal plants, it is also the largest shareholder in oil, gas, and thermal coal reserves.”
This is at least partially a function of Blackrock being the largest asset manager in the world, but make no mistake, they are talking out of both sides of their mouths. Even with their most recent announcement concerning a “25% of revenue” threshold for divestment in its discretionary portfolios, Blackrock will remain one of the largest shareholders of the world’s largest coal companies.
I won’t belabor the point. These efforts are only scratching the surface. Sustainable finance is by definition inclusive, distributed, and return-enhancing. Investment firms like CircleUp are changing the investment process at its core and by extension, underpinning the real shift to sustainable finance. Firms like ours are leveraging advances in machine learning and non-financial metrics to systematically originate, compare and execute investments in sustainability. Other firms include Generate Capital and Generation Investment Management. And it’s these kinds of processes and firms that are going to get the world as a whole to where it needs to go in the next decade.