BlackRock has launched an active transition fund targeting the materials sector.
The investment giant's thematics and sectors team expects that demand for transition materials is set to grow faster than historical rates driven by the move to a low carbon global economy.
The launch of the BlackRock Global Funds [BGF] Brown to Green Materials Fund aims to provide exposure to both materials that are essential to a transition and opportunities created by decarbonising materials supply.
The newly launched fund will be classified as Article 8 under SFDR and will be a concentrated portfolio of 30-60 global companies.
As well as the materials sector which includes companies engaged in metals and mining, chemicals, steel, and construction materials, the Brown to Green Materials theme will also incorporate the materials supply chain and electrical equipment manufacturers with focus on decarbonisation including industrial companies offering products such as electric mining trucks or lower carbon steel furnaces.
In identifying investment opportunities, BlackRock - the world’s largest asset manager with $8.5 trillion in AuM - noted results from capital markets firm Jeffries showing that demand for copper used in electric vehicles and renewables, for example, is expected to be around 4.8x higher in 2030 versus 2022.
“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," explained Olivia Markham, managing director and portfolio manager at BlackRock.
"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.”
In launching the fund, BlackRock also cited data from Climate Watch showing that over 17% of global greenhouse gas emissions are currently derived from the materials sector.
In March this year, it was reported that BlackRock is planning to ramp up the amount of products and services it offers to help investors “navigate, drive and invent” the transition to net zero.
