BlackRock Investment Institute Views on 2024 and Long-term Sustainable Investment Opportunities

March 2024

by Hank Boerner – Chair & Chief Strategist, G&A Institute.

What immediate and then the longer-term trends could we be monitoring to identify sustainable investment opportunities in 2024 and 2025, and well beyond? What “mega forces” are at work today re-shaping the global capital markets and presenting investment opportunities (or, presenting risk in ignoring opportunities)?

The authors at the BlackRock Investment Institute (BlackRock is the world’s largest asset management firm), in a recent commentary suggested five important transition trends to consider as the world edges toward a low-carbon economy.  

In 2023 the institute suggested that the transition to a lower carbon economy was a major trend to monitor. The low carbon economy transition themes suggested now (in early 2024) is a continuation of BlackRock’s climate change transitions focus. 

These are important “mega forces” at work, say the authors at the institute and the global head of BlackRock climate infrastructure in a recent commentary — the forces are “big, structural changes that affect investing now, and well into the future”.

These key drivers are changing long-term growth and represent major shifts in profitability [of firms] across sectors and geographies.  The “mega-forces” identified by the BlackRock:

• Demographic divergence – splits occurring between well-established, aging economies – and those of younger, emerging economies.
• Digital disruption and AI – key technologies are transforming how we live and work.
• Geopolitical fragmentation and economic competition – globalization is being “re-wired”, and splitting into competing blocs
• The Future of finance – characterized by evolving, fast-changing financial architecture (for households and companies), and impacting transactions and investing.
• The transition to a low-carbon economy – setting the stage for the  massive capital re-allocations.

Shorter-term, the institute authors pointed to things to watch:

• Cheaper batteries that are available today with constantly falling prices over time that could lead to greater demand for energy storage systems to support the power grid (batteries to store unused solar and wind-power), as well as creating more utilization in electric-powered vehicles. (The price of lithium is way down the authors note; this is a key element of battery manufacture. The institute cites 1/3 of production cost in some clean energy technologies is cost of batteries.)
• The coming 2024 elections, with ballot outcomes (depending on who will have the power) to could shape industrial policies and energy policies in various nations (and in the U.S., in individual states along the Red and Blue divide). 
• Physical damages resulting from recent storms is focusing more investor attention on a new theme for investors: “climate resilience”. 

Content explaining more about the mega forces is available on the BlackRock web hub.

The BlackRock Investment Institute commentators – Wei Li, Chris Weber, Jessica Thye, and David Giordano, Global Head of Climate Infrastructure – note they are monitoring battery pricing, elections around the globe, and capital market attention on climate resilience for detecting impacts on transition-related investment opportunities and risks.

The BlackRock commentary for institutional investors is at: https://www.blackrock.com/corporate/literature/market-commentary/weekly-investment-commentary-en-us-20240311-low-carbon-transition-themes-in-2024.pdf