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Singaporean sovereign fund and BlackRock become ‘decarbonisation partners’ in $600m venture capital project

Partnership follows launch of BlackRock’s record-breaking climate ETFs last week

US investment behemoth Blackrock and Singapore's state-owned investment company Temasek have announced that they will team up to launch a series of “late stage venture capital and early growth private equity investment funds” focused on innovative decarbonisation solutions. 

The partnership – named Decarbonization Partners – will initially see the duo commit $600m between them, to invest in “multiple” funds. The partnership will seek third-party capital and has set a fundraising target of $1bn for its first fund.

Judging by the launch of BlackRock’s climate ETFs last week, attracting capital shouldn’t be a challenge. More than $1.2bn flowed into the asset manager’s US-focused Carbon Transition Readiness fund on its first day, making it the largest ETF launch of all time. Finnish investment giant Varma provided a €200m anchor investment for the strategy, which began trading on the New York Stock Exchange on Thursday, and Temasek was another investor. Californian public pension fund CalSTRS was also among the backers of the new ETF and its ex-US version, which was launched at the same time and raised around $500m.  

According to BlackRock, the ETFs systematically overweights or underweights individual companies relative to benchmarks based on how prepared they are for the climate transition. The US version is benchmarked to the Russell 1000 Index while the ex-US strategy tracks the MSCI World ex USA Index.

BlackRock and Temasek’s new partnership will see the pair create funds that focus on “early stage growth companies targeting proven, next-generation renewable and mobility technology”, such as emerging fuel sources, grid solutions, battery storage and electric and autonomous vehicle technologies, as well as in building and manufacturing sectors.

“The world cannot meet its net zero ambitions without transformational innovation,” said Larry Fink, CEO of BlackRock. “For decarbonization solutions and technologies to transform our economy, they need to be scaled. To do that, they need patient, well-managed capital to support their vital goals.”

“Bold, aggressive actions are needed to make the global net zero ambition a reality”, added Dilhan Pillay, Temasek’s CEO. “Decarbonization Partners represents one of several steps we are taking to follow through on our commitment to halve the emissions from our portfolio by 2030, and ultimately move to net zero emissions by 2050.” 

Last month, Temasek also made what is described as “the largest ever single commitment to an impact investor” in a $500m deal with Australia’s LeapFrog Investments, which also sees it take a minority stake in the firm.