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BlackRock believes that carbon-intensive companies—including in oil and gas—which have plans for decarbonization could be “an underappreciated opportunity for investors,” the world’s biggest asset manager said in a letter to clients.
“We believe an underappreciated opportunity for investors seeking to drive the transition lies in identifying carbon-intensive companies that are positioning themselves to lead decarbonization within their industries,” BlackRock said in its note ‘How to invest in the net zero transition.’
The ongoing shocks in the energy sector are an example of the challenges of the energy transition, the top money manager in the world said.
“Increased investment in the supply of renewables outpaced the reduced investment in fossil fuels. Now, increased demand for fossil fuels in the restart of economic activity and impaired supply have driven up the price and use of gas, oil, and coal. There will be periods like this when traditional energy performs well – periods that should not be seen as counter to the transition, but as part of it,” said BlackRock.
During the decades-long energy transition, some incumbents will be displaced by new technologies, “But many other incumbents will thrive, providing important investment opportunities for our clients, and successful decarbonization plans by these companies will be critical to an orderly transition,” according to the asset manager.
BlackRock’s bottom line is that “Companies and investors cannot ignore the transition;” it is no longer a matter of whether, but how.
In his annual 2022 letter to CEOs, BlackRock’s CEO Larry Fink wrote earlier this year that “traditional fossil fuels like natural gas will play an important role both for power generation and heating in certain regions, as well as for the production of hydrogen.”
“Divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero. And BlackRock does not pursue divestment from oil and gas companies as a policy,” Fink said.
“We believe the companies leading the transition present a vital investment opportunity for our clients and driving capital towards these phoenixes will be essential to achieving a net zero world,” BlackRock’s chief executive noted.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.