On Tuesday, a newly introduced BlackRock fund , the “Brown to Green Materials Fund,” aims to invest in carbon-intensive companies undervalued in the market, specifically those involved in producing raw materials and products that drive the energy transition.
Investors are increasingly focusing on the decarbonization efforts of companies in industries like metals and mining, cement, and construction, as these sectors are responsible for more than 17% of global greenhouse gas emissions.
BlackRock stated that if the adoption of lower carbon technologies surpasses expectations, there will be a surge in demand for critical metals such as lithium and copper, benefiting companies across the entire supply chain, from mining to end-product.
Those companies that produce the materials and have a quality plan to decarbonise – and their suppliers – should re-rate as their margins get a boost and sustainability risks decrease, it said.
The BlackRock fund manager screened index provider MSCI’s All-Country World Index for the world’s highest emitting companies that are likely to see rising demand as a result of the transition over the next 10-20 years, selecting those with the technology and finances to implement changes in a realistic timeframe, said Evy Hambro, BlackRock’s global head of Thematic and Sector Investing.
He told media that the broad materials universe is trading at a significant discount compared to the broader market and growth opportunity, based on how market participants have historically viewed it.
Once people grasp that these businesses are progressively adopting greener production processes, it is probable that the discount applied to them will decrease.