Larry Fink fears energy transition, warns of market arbitrage

LONDON. Larry Fink, chairman and CEO of BlackRock, says the so-called greener energy transition needs to be radically rethought and criticizes oil companies for selling them to private companies.

Speaking at the Green Horizon Summit chaired by CNBC’s Julianne Tatelbaum during the COP26 climate conference in Glasgow, Scotland, Fink praised state-owned companies for increasing emissions reporting, but criticized oil companies for selling part of their business to private investors and said it could create a huge market arbitrage.

“We can’t just ask public companies to move forward without the rest of society. This will create the largest arbitrage in the capital market. We see that over the past few years more hydrocarbons have been sold to private companies than ever before. This does not change the world at all. This actually makes it, the world is even worse, because it is moving from publicly disclosed companies to opaque private enterprises. So the mission fails if that’s all you do, ”he said. stated.

Arbitration refers to market inefficiencies that allow investors or companies to make a profit.

Some oil companies are selling their more polluting assets to private companies, creating more green storytelling for shareholders. But these assets still exist and are less transparent in private hands, Fink said. “This will not lead to a zero-metric change in the world. This is window dressing, green purity, ”he said.

One solution, according to Fink, is to create new financial mechanisms to spin off the oil assets, where the energy company will then channel all of the proceeds from the sale to green technologies. “We need to create cars of this type, as we did during [the] financial crisis with banks, we need to create new mechanisms, new thought processes, ”he said.

According to Fink, BlackRock, the world’s largest money manager, “works with it, not against it” in terms of relationships with oil companies. “The key point for our hydrocarbon companies is that they need to move quickly to a more decarbonized business model. But at the same time, they are the number one supplier of energy, gas and oil in a society that is still completely dependent on it. “, – he admitted.

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“We need to rethink how we can quickly leverage new capital in greening the world, but not avoid hydrocarbons in the short term, otherwise we will have oil for $ 120, 140, and this is unfair and unfair,” added Fink.

Developing world

Fink warned that developing countries “won’t come because they can’t afford it” in terms of the green energy transition. “We need an honest and fair transition. If we do not get a just and just transition, we will create even greater polarization in the world, greater political uncertainty, ”he warned.

He said the World Bank and the International Monetary Fund will need to rethink to ensure that enough money flows to developing countries to help them cope with climate change. “If we are serious about increasing the amount of capital that goes to the developing world, now it is only about $ 150 billion, and by all estimates, we will have to reach $ 1 trillion a year over the next 30 years. really move the whole world, including developing countries, to a more sustainable platform, ”he said.

“I urge the owners of these institutions, the owners of the shares, and these are all the major countries of the world, to focus on how we can rethink these institutions,” he added.

BlackRock said it has raised $ 673 million in a climate infrastructure fund for projects in emerging markets. according to a Reuters report Tuesday. The Climate Finance Partnership is supported by the governments of Japan, France and Germany.

BlackRock was targeting a $ 500 million investment, so the fund’s subscription was exceeded, Fink said at the COP26 event. “We could attract a lot more, and this is a great example of using the opportunities of state capital,” he said.

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