Post by Fogg on Aug 10, 2023 11:39:48 GMT 12
There's no shortage of capital. The problem is where to put the capital i.e. a big shortage of high-quality investments.
The hottest growth sectors for PE / VC right now include GreenTech (alongside the usual suspects like AI, HealthTech, FinTech etc).
By GreenTech we mean not just investing in wind-farms but investment in managing the whole transition from today's setup to more sustainable versions.
Enter BlackRock. They have a very mixed reputation (to put it mildly) in the PE / VC industry - which is saying something. Their CEO Larry Fink has flipped-flopped all over the place on ESG with actions frequently not matching words. The result is that even in an industry that is not well-loved, he is hated by many for his hypocritical stance. Recently, Fink announced he would drop the term "ESG" because it had become "weaponised". Mainly it has become weaponised against him because on the one hand he claims strong green credentials but on the other invests heavily in FFs to drive shareholder return. This confuses everyone and puts BlackRock in the unique position of being a target from both sides - from climate activities who say BR is not doing enough for the planet through to angry investors who say he's not doing enough for their returns. All this noise makes BlackRock a questionable and unpredictable brand to be associated with.
Enter NZ Govt. They don't get this and have been friendly with BlackRock for many years to help manage NZ's SWFs.
Now, putting all of this together...
What does BlackRock want: continued friendship with NZ Govt (to keep managing NZ Super) plus any opps to improve their brand.
What does NZ Govt want: a big, powerful, global headline-grabbing name to endorse NZ's journey towards green-ness (never mind the details).
So what is actually going to happen:
BlackRock will turn-up (actually they've already been here for years) and offer to lead the raise on a new $2Bn renewable energy fund. It aims to attract investment from both within and outside NZ and then invest it into new green energy infrastructure businesses & projects based in NZ. The rules of where the money comes from or how it will be invested are currently unspecified but of course will be driven by BR as the lead. And of course that will drive the investment cycle including how quickly the fund will need to see returns (typically 7yrs is considered a long-term hold after which the fund managers look for a profitable exit). And as we all know, very few problems are going to be fixed within 7yrs - which will be a fundamental tension in this arrangement.
Most likely, after 7-10 yrs, we'll see a handful of mildly successful companies which have been born or accelerated out of this fund and driven hard by the fund managers for a fast return before the fund close date. And they will then be sold to another 'friendly' fund or some other willing investor. In other words nobody will taking a long-enough view to take the really big risks and stay the course long enough.
Of course, the narrative will be that by having a big enough fund and a wide enough spread of investments across the portfolio, this will achieve the necessary diversification and longevity. But all of that assumes that (1) they can find good enough GreenTech talent and capability here in NZ to actually deliver something and (2) someone insists the fund managers takes a long enough view to wait for sustainable change.
In short, it's a strategy of hope by NZ Govt as they try to outsource the delivery of new cleaner energy solutions by using the only big name they could find to get involved with this. And it's a strategy of hope by BlackRock to recover some recent brand damage by associating themselves with a harmless and 'green' Govt like NZ (as seen by the rest of the world).
So there might be some good stuff that comes out this but that will be more by luck than judgement and the primary purpose of this arrangement is a brand-management exercise by both NZ Govt & BR.
The hottest growth sectors for PE / VC right now include GreenTech (alongside the usual suspects like AI, HealthTech, FinTech etc).
By GreenTech we mean not just investing in wind-farms but investment in managing the whole transition from today's setup to more sustainable versions.
Enter BlackRock. They have a very mixed reputation (to put it mildly) in the PE / VC industry - which is saying something. Their CEO Larry Fink has flipped-flopped all over the place on ESG with actions frequently not matching words. The result is that even in an industry that is not well-loved, he is hated by many for his hypocritical stance. Recently, Fink announced he would drop the term "ESG" because it had become "weaponised". Mainly it has become weaponised against him because on the one hand he claims strong green credentials but on the other invests heavily in FFs to drive shareholder return. This confuses everyone and puts BlackRock in the unique position of being a target from both sides - from climate activities who say BR is not doing enough for the planet through to angry investors who say he's not doing enough for their returns. All this noise makes BlackRock a questionable and unpredictable brand to be associated with.
Enter NZ Govt. They don't get this and have been friendly with BlackRock for many years to help manage NZ's SWFs.
Now, putting all of this together...
What does BlackRock want: continued friendship with NZ Govt (to keep managing NZ Super) plus any opps to improve their brand.
What does NZ Govt want: a big, powerful, global headline-grabbing name to endorse NZ's journey towards green-ness (never mind the details).
So what is actually going to happen:
BlackRock will turn-up (actually they've already been here for years) and offer to lead the raise on a new $2Bn renewable energy fund. It aims to attract investment from both within and outside NZ and then invest it into new green energy infrastructure businesses & projects based in NZ. The rules of where the money comes from or how it will be invested are currently unspecified but of course will be driven by BR as the lead. And of course that will drive the investment cycle including how quickly the fund will need to see returns (typically 7yrs is considered a long-term hold after which the fund managers look for a profitable exit). And as we all know, very few problems are going to be fixed within 7yrs - which will be a fundamental tension in this arrangement.
Most likely, after 7-10 yrs, we'll see a handful of mildly successful companies which have been born or accelerated out of this fund and driven hard by the fund managers for a fast return before the fund close date. And they will then be sold to another 'friendly' fund or some other willing investor. In other words nobody will taking a long-enough view to take the really big risks and stay the course long enough.
Of course, the narrative will be that by having a big enough fund and a wide enough spread of investments across the portfolio, this will achieve the necessary diversification and longevity. But all of that assumes that (1) they can find good enough GreenTech talent and capability here in NZ to actually deliver something and (2) someone insists the fund managers takes a long enough view to wait for sustainable change.
In short, it's a strategy of hope by NZ Govt as they try to outsource the delivery of new cleaner energy solutions by using the only big name they could find to get involved with this. And it's a strategy of hope by BlackRock to recover some recent brand damage by associating themselves with a harmless and 'green' Govt like NZ (as seen by the rest of the world).
So there might be some good stuff that comes out this but that will be more by luck than judgement and the primary purpose of this arrangement is a brand-management exercise by both NZ Govt & BR.
