A new world of renewables
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A new world of renewables: Part II

In the final installment of this two-part paper, we take a closer look at emerging market trends and opportunities.

A closer look at emerging market trends and opportunities

Amid a global push to address climate change via a net-zero transition before 2050, we identified – in part one of this series – that emerging and developed markets are following divergent decarbonization paths.

In part two, the key question for investors is where and how. Here, we look across Asia, Latin America and Africa, where renewable investments are most needed and may create the most positive social and environmental impact. We also consider innovative partnership structures that bring together development capital (focused on making positive impact) and traditional capital (focused on risk-adjusted returns).

Key points

01

A sharper focus on emerging markets

For us, the opportunity set for renewable investments across Asia, Latin America and Africa are immense and compelling. Indeed, there are massive differences in local fundamentals, market structures and regulatory frameworks.

02

Strategies tailored and suited to local conditions

To be successful in these newer regions, investor strategy needs to be well-adapted to local market conditions. The right strategy will differ by market, which may range from new greenfield projects in less-developed countries; supporting capacity roll-out in transitioning markets; or a drive to reduce pollution in industrialized areas.

03

Creating innovative partnerships

In our view, the right capital partnership structure may go a long way in delivering the right combination to achieve climate change objectives, setting private incentives, and providing a better risk management framework.

Building greener economies in Asia

The massive and diverse economies of Asia are expanding and maturing at a relentless pace. While this rapid industrialization is bringing beneficial growth in household incomes and economic activity, it is also adding significant disruption and stress to the local environment. In our view, there is greater urgency for the renewable energy transition in Asia, especially in high-growth emerging markets.

The renewable opportunity set in Asia is massive in scale and scope

29 non-OECD markets, 4.2 billion population

Renewable opportunities in Asia

Source: Bloomberg NEF, IMF, IQAir (June 2021), as of 6/30/2021.

The stage is set for renewables in Latin America

The energy markets of Latin America are already making good progress on the renewable energy transition, supported by sustained economic growth, healthy power demand and the right mix of policy mandates and incentives.

Latin America’s renewable outlook by city

18 non-OECD + 3 OECD markets, 608 million population

Latin America’s renewable outlook by city

Source: 1 Population as at 2020 in millions (IMF as of 4/30/2021). 2 Real GDP growth for 2021-25 (IMF as of 4/30/2021). 3 % share of total capacity (Bloomberg NEF 2019). 4 Installed renewable generation capacity (Bloomberg NEF 2019). 5 Bloomberg NEF 2019, IRENA. There is no guarantee that any forecasts and forward-looking expectations made will come to pass.

A cleaner path for development in Africa

Africa is still relatively early in its development journey, as the region strives to lift incomes and bring the ‘next billion’ people into the middle class. While Africa is industrializing rapidly, it is still heavily constrained by inadequate and inconsistent access to electricity, not to mention prohibitive pricing in some poorer countries. There are considerable economic benefits with extending electricity network coverage, reducing power cost and improving access and reliability.

The outlook for African renewable power generation is very sunny

29 non-OECD markets, 1.1 billion population

Renewable opportunities in Africa

Source: Bloomberg NEF, Brookings Institution, IMF, BlackRock Real Assets (June 2021), as of 6/30/2021.

A new world of opportunities

Capital partnerships are crucial in incentivizing and mobilizing private capital to address a shared public need, particularly through renewable energy markets in emerging economies, where most of the work is needed and where most of the positive social and environmental impacts may be realized.

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In 2021, our joint focus is on assembling private institutional capital, to make the partnership a reality… We cannot leave anybody behind.

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Larry Fink BlackRock CEO
Download the full report on ‘A new world of renewables: Part II’
In the final installment of this two-part paper, we take a closer look at emerging market trends and renewable opportunities across the globe.
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Rael McNally
Senior Portfolio Manager, Global Renewable Power Group
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Freek Spoorenberg
Head of Product Strategy & Investor Relations, Infrastructure Equity
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Bruce Wan
Head of APAC Research, Real Assets
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Crystal Low
Portfolio Strategy, BlackRock Infrastructure Solutions
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