BLACKROCK FUTURE FORUM
Sustainability: The path to net zero
Innovative leaders in finance, sustainable energy and the auto industry discuss the crucial role businesses will play in transforming the economy to net-zero carbon emissions in the years ahead. Sustainable investing professionals discuss the risks and opportunities presented by the coming transition.
Coming together to build a sustainable future
Governments, companies and individuals around the world feel the climate urgency. They are bearing down on the need to reduce carbon emissions in order to head off worst-case climate change scenarios. We collectively need to pursue and promote innovations throughout the economy to reduce the cost of going green and boost consumer demand for sustainable products and services. Finance is vital to develop sustainable solutions and technologies. Increasingly, investors will allocate capital in ways that favor companies with climate-aware practices. To explore the future of sustainability in business and investing, we convened four of the most influential leaders in the corporate and finance worlds and five leading investors with deep experience in sustainable strategies.
The tectonic shift to sustainable investing
Three powerful forces are converging to drive a long-term trend in favor of sustainable assets. Investors positioned for the shift stand to benefit.
Innovating for a sustainable future: keynote sessions
The BlackRock Future Forum begins with CNBC newscaster Becky Quick moderating a conversation between Bill Gates, founder of Breakthrough Energy, and BlackRock Chairman and CEO Larry Fink. They discuss the urgency of more-sustainable practices across the economy, the path to a future with net-zero carbon emissions and the connections between climate risk and investment risk. Next, BlackRock Chief Client Officer Mark McCombe leads two discussions with groundbreaking auto-industry leaders: Mary Barra, Chairman and CEO of General Motors, and R.J. Scaringe, Founder and CEO of electric vehicle company Rivian. Barra and Scaringe discuss the massive transition facing their industry over the next two decades, as the push for sustainability disrupts everything from vehicle production to fueling.
The same thing that allowed the dream of a personal computer to become real—we've got to apply that to climate problems.
Highlights include:
01
How to decrease the green premium
Bill Gates contends that the economy’s great challenge is to reduce the "green premium"—the additional cost of carbon-neutral products over carbon-intensive ones. That job, he says, demands both innovation and consumer demand that will drive investment and economies of scale.
02
How Rivian is creating the mass market for EVs
Roughly 2% of new vehicles sold in 2020 were electric (EVs). As we look to increase that number to 100%, startups, like Rivian, and established companies all play a key role in innovating and pioneering new technologies and business models to drive mass adoption of EVs and spur competition.
03
An iconic car brand commits to electrification and net zero
GM has committed to electrifying all of its passenger cars by 2035. To achieve this goal, the company is reinventing itself, and started with empowering their people to be part of the EV transition. Cultivating talent and continuous innovation is paving the way to overcome hurdles to increased consumer demand and adoption.
Becky Quick: I want to ask you, do you consider the developing countries to be a bigger problem in terms of what you can get them to commit to and be onboard? Or do you think the developed nations are the ones where there's a bigger problem because democracy is messy?
Bill Gates: Well, the bulk of emissions in the decades ahead will come from developing countries. Let's think of it in three tiers. The rich countries, that's Europe, U.S., Japan.
The middle income countries, that's where most of humanity lives. That's China on the high end, high/middle income, and India on the low end. And you've got Brazil, Mexico, Indonesia, and Vietnam, a lot of the world's population there. And then you have some very poor countries, a lot in Africa. The responsibility to innovate rests entirely on the rich countries and, particularly, on the U.S.
Because the U.S. has the universities, the national labs. It's got the ability to organize risk-oriented capital. So we will not solve climate change without the rich world driving down dramatically -- perhaps we need over 90 percent reduction in those green premiums. That's what will make it economic for the middle income countries, who are not responsible for the historic emissions, and who are dealing with more basic needs.
They're not going to cut back and say, “Okay. We're not going to do air conditioning in India.” Because, after all, climate change means they really are going to need it. In fact, they haven't been advocates as much and, yet, a lot of those countries are nearer the Equator and are going to suffer dramatically more than more temperate zone customers. So I do expect them to become even stronger advocates in those areas.
But if the rich countries don't lead the way, then it absolutely is not going to happen. So it takes both the rich countries and the middle income countries.
Becky Quick: Part of the problem in the United States is local regulatory infrastructure, too. Slowing down things that would need to happen to, let's say, build transmission lines across the United States. How do we tackle that?
Bill Gates: Yeah. That particular problem I'm pretty exercised about. Because to build this new electric grid that the Biden Administration has said, “Hey, let's have a green grid by 2035,” well, that grid is going to have to be two-and-a-half to three times bigger than today's. Because as you shift heating all the buildings from natural gas to electricity, as you shift the energy that makes your car drive up a hill from gasoline to electricity, it just drives up aggregate electricity demand.
So you're having to grow the electric network at the same time that you're making it green, and you have to keep it cheap and you have to keep it reliable. And that is very, very daunting. And the greatest bottleneck to do that is the inability to build transmission. The sources of renewable power, which will be over 80 percent of how we do generation, they're not in the same place where you use the power.
In the past, you could put the coal plant, the natural gas plant, and the nuclear plant near to where the power usage was. But the wind in the U.S. onshore is mostly in the center of the country. The power usage is more on the coast. So now we have an open source model that people can fill in and show what you think this 2035 grid looks like.
Where are the sources? And then we can run a simulation and say, “Did you maintain reliability in the top weather conditions?” And so now the discussion is going to be concrete. But it's going to be very hard to get that grid going, even if we clear all of the transmission bottlenecks.
Becky Quick: Is that a conversation that's taking place at the federal level right now in the right places in the Administration?
Bill Gates: Well, since they said they have this goal of 2035, it's unlike something that's like 30 years away, where most people think, “Hey, I won't be in charge, and maybe it will get easier 15 years from now and my successor -- either political successor or CEO successor -- they'll have to worry about it.” When we have this as a 15 year goal to have this green grid, now you're engaging the engineers in the seriousness of the various utility companies.
And you're saying to them, “Hey, you look at this model. What do you think will happen?” And so the realization that that goal is extremely hard to achieve over the next few years, we really will get responsible engineering type thinking that will show, oh, my goodness, even to hit 2040 we would have to build transmission, storage, wind, solar, and some non-weather dependent energy source, which could be nuclear, but that's got its own challenges.
Now this is getting real. And finally it's part of the maturation of this whole field. As Larry said, people could throw around the idea of, “Okay, we're a net zero company.” Well, now we're putting in place definitions. The leading companies are starting to pay for offsets, which is amazing. It's fantastic.
But some of those offsets haven't really been looked at in terms of the real impact they have. And so that's another effort, is to have certification of different offsets. Some of which are very, very strong, like carbon capture and sequestration, where it stays underground for millions of years. And some, like if you just plant a tree one time, that only keeps the carbon out for, at most, decades.
Becky Quick: I think one of the things that has surprised me most during this last year with the pandemic that took all of our attention and changed all of our lives so drastically is that climate change didn't go away. That [talk] didn't go away like it did in 2008. And, Larry, you mentioned that in your letter, too. It became something that was even more front and center. Why do you think that is?
Larry Fink: I think when we have to respond to an existential health risk that we all had to face, we all read about pandemics, we all talked about them. We were all frightened of it. Movies, popular culture has always been about the potential of a pandemic and high death rates. And here we are, we have a reality. It's real. And so it's not pop culture, it's reality. And I think that's a big point because it went from pop culture and history books to reality.
And at the same time, we're experiencing more physical climate risk impacts in many parts of the world. And I think that existential health risk is now elevating the consciousness of many people of the existential health risk to the planet. And I think they connect very closely. And I could speak about many of our young people that work at the firm.
Their lives were much more impacted working remotely than people who have been in the business a long time. They had their connections within the business. They were more isolated. They're also thinking about their broad future and their future life. And they are speaking more loudly than most components of our population about climate risk and what does that mean for their future, too.
So I think it's all interconnected. I think it's all interconnected in terms of our consciousness. Okay, this is not pop culture. The COVID-19 is real. And this existential question about climate risk is now becoming more real. And as Bill suggested now, if we have a program that we want to get to a point in 15 years versus 30, that becomes more real, too.
So I think this is all part of society recognizing these risks and society having a fear of that future. And society is now asking questions about how do we resolve this? We're not completely there yet. But with our scale in terms of the amount of money we manage for so many people, we get all this input. And the input now, I can tell you, is so dominated by this whole concept of climate risk and transition risk.
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Extended interview: Larry Fink and Bill Gates
For a world dependent on carbon, where and how can we collectively spur action and accelerate the change we need? Two industry visionaries explore their personal journeys and opportunities for the clean energy transition, including the innovations and catalysts needed across the public and private sectors.
New opportunities in a new economy: investor perspectives
Four of BlackRock’s sustainable investing experts as well as the sustainable director of the second-largest public pension fund in the U.S. share their views on climate-aware investing in a conversation hosted by Zach Buchwald, BlackRock's Head of Institutional Business for the U.S. and Canada. Paul Bodnar, Mary-Catherine Lader, Teresa O'Flynn, Eric Rice and Kirsty Jenkinson discuss the companies and investors’ responsibility to help push the global economy toward net-zero carbon emissions. They say the transition to a more-sustainable economy offers myriad opportunities for investors in public equities, private capital, fixed income and other assets.
The reality is that the net zero transition and its investment opportunity won't just be about a few industries. It will be about the whole interconnected economy
Highlights include:
01
Net-zero creates opportunities across the economy
In the transition to a net-zero economy, companies throughout the market will shift to lower carbon emissions and apply a variety of technologies and innovations to get us there. Public and private companies that demonstrate high transition readiness will offer compelling investment opportunities.
02
New tools and data for climate-aware investing
Lack of data historically has been a barrier to incorporate climate risk into portfolios. Now powerful new tools integrate climate science and policy analysis to measure climate change’s potential impact on investments—as well as investments’ potential impact on the climate.
03
Sustainable investing has produced alpha
Sustainable investments outperformed their counterparts in 2020 and have held up better during periods of market turmoil.1 As the economy transitions to net zero, markets should adjust in favor of the best-prepared companies. Climate-aware portfolios stand to be more resilient, helping those who embrace sustainability achieve their objectives.
Kirsty Jenkinson
Investment Director of Sustainable Investment and Stewardship Strategies, California State
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Mary-Catherine Lader
Head of Aladdin Sustainability, BlackRock
Teresa O'Flynn
Global Head of Sustainable Investing for BlackRock Alternatives Investors, BlackRock
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BlackRock Future Forum
Explore our series of discussions with policy makers and industry experts from the technology, healthcare, and energy sectors on the topics that are driving markets and impacting society.
