Takeaways from the Bloomberg New Energy Finance Summit 2022

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Posted 43 minutes ago

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About the team

Rob Camacho is responsible for asset-based finance within Blackstone’s structured finance group. Robert Horn is Global Head of Sustainable Resources Group for Blackstone Credit. Dr. John Rogers is Global Head of ESG at Blackstone.

Experts estimate that more than $100 trillion will be needed by 2050 to avoid the worst effects of climate change. At Blackstone, we invest in companies and projects that support energy transition and climate change solutions. Three of our leaders recently spoke at the Bloomberg New Energy Finance Summit in New York City about the trends they are seeing in the space and the role private capital plays in accelerating a stronger, more sustainable future.

Necessity inspires innovation.

Today’s high energy prices pose significant challenges for consumers and businesses, but history suggests that environments like this can ultimately lead to progress towards a cleaner energy future and more affordable.

“We see similarities between the 1970s and today, including concerns about energy security. This experience has spurred energy-efficiency innovation and investment in many of the technologies we use today. This story gives me confidence that we can make the energy transition, build new industries and new value chains in the future.

― Robert Horn, Global Head of Sustainable Resources, Blackstone Credit

You cannot diversify away from climate risk.

Climate change will impact all sectors of the global economy, forcing investors to rethink their approach to risk. Carbon emissions reports are a good starting point; however, to effectively manage risk on this scale, investors must tailor their strategies to the most important factors in a given company or industry.

“You can’t diversify [from climate risk]. You have to manage the results and do it in a meaningful way. . . and focus on areas that will have very strong tailwinds and those that will face headwinds.

― Jean Rogers, Global Head of ESG

Moving the needle on climate requires significant carbon reduction.

We are living in a “good rush”: year-over-year, the global universe of sustainable funds grew by 53%, indicating intense investor appetite for sustainable vehicles. However, meaningful carbon reduction more broadly will require active management and concrete, ambitious decarbonization KPIs. Private market investors must play a significant role in accelerating the energy transition in partnership with portfolio companies.

“At Blackstone, we have set a 15% emissions reduction target, an overarching three-year target that applies to all new investments where we monitor energy consumption. We start with energy conservation efforts, then move on to carbon sourcing, offsets and renewal. The companies in our portfolio do not want to decarbonize at all costs; they want to do it in the most efficient way and end up not only low-carbon, but also more competitive.

― Jean Rogers, Global Head of ESG

Credit has a crucial role to play.

Flexible capital and the ability to deploy it at scale are key to financing decarbonization. Credit is well suited to capital-intensive projects typical of the energy transition, and instruments such as sustainability-linked loans can incentivize companies to make meaningful progress on specific ESG measures.

“Sustainability-linked lending can help create value, not only for the credit holder, but also for equity holders and for the company as a whole. We recently invested in a building energy efficiency company and identified three important KPIs: renewable energy supply, carbon emissions reduction and workforce diversity. We have incorporated these measures into the pricing of the loan, and our ESG team monitors this annually with third parties. We have found this to be a great tool for both sustainable businesses and companies at different stages of their sustainability journey.

― Robert Horn, Global Head of Sustainable Resources, Blackstone Credit

“Blackstone manages over $100 billion in insurance capital and we seek to match high-quality, long-term contracts with high-quality, long-term insurance liabilities. Energy transition infrastructures perfectly meet these needs: they are stable, long-lasting and require inexpensive and scalable capital. We are excited to drive the energy transition forward by combining our energy expertise and structured finance expertise with our insurance capital.

― Rob Camacho, Head of Asset-Based Finance, Blackstone Structured Finance Group

Since 2019, Blackstone has committed about $16 billion in investments that the company says are compatible with the broader energy transition. We have also launched a Sustainable Resources Platform within our Credit business. The platform will invest across the credit spectrum and focus on a wide range of sectors, including residential solar power and home efficiency, electric vehicles, and green finance that funds environmental projects. Across our businesses, we see an opportunity to invest approximately $100 billion in energy transition projects and climate change solutions over the next decade.

Learn more about Blackstone’s sustainability efforts.

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Blackstone is one of the world’s leading investment companies. We seek to create positive economic impact and long-term value for our investors, the companies in which we invest and the communities in which we work. We do this by using amazing people and flexible capital to help companies solve their problems. Our $731 billion in assets under management include investment vehicles focused on private equity, real estate, debt and public equity, life sciences, growth capital, quality opportunistic credit lower, real assets and secondary funds, all on a global scale. Further information is available at www.blackstone.com. Follow Blackstone on Twitter @Blackstone.

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