BlackRock has launched a further ESG product that targets carbon transition in the materials sector.
The BlackRock Global Funds Brown to Green Materials Fund will invest in carbon-intensive companies that have a strong transition strategy and/or companies that supply the materials for transition.
The ‘brown to green materials’ theme includes companies engaged in metals and mining, chemicals, steel, and construction materials, as well as the materials supply chain and electrical equipment manufacturers that enable materials companies to decarbonise, which could include industrial companies offering electric mining trucks, for example.
According to research, material companies are responsible for over 17% of global greenhouse gas emissions, but as those companies transition, BlackRock expects they will benefit from a re-rating as their sustainability risks decrease.
Additionally, companies supplying transition materials will see stronger-than-expected earnings growth if the adoption of lower-carbon technologies exceeds expectations and the market for low-carbon materials develops.
Olivia Markham, a portfolio manager at BlackRock, said: “A low carbon transition sees the global economy moving from an energy system that is fossil fuel and carbon-intensive to one where the critical inputs are materials and metals.”
She added: “Following a period in which producers’ capital discipline has led to supply constraints, this is an exciting structural demand story that we expect to lead to significant value-creation opportunities for investors.”
The fund will be classified as Article 8 under SFDR and will be a portfolio of 30-60 global companies.
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