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Government and BlackRock promoting each other – Part 1

In brief
  • BlackRock stands with Labour to announce a $2b New Zealand net zero Fund, but it’s all intention at this point. 
  • In reality, no agreement is really necessary for BlackRock to invest in NZ. Just follow the rules like everybody else. 
  • Labour is campaigning off BlackRock’s name. Should voters be concerned about what BlackRock may want should Labour win the election?
Ironic that Labour is now trying to lever BlackRock, one of the world’s beacons of capitalism, for votes

If the Labour party is to be re-elected, it currently appears that it will require The Greens and Te Pati Māori. This is a very left leaning group, with 2 of the 3 parties insisting on a hefty wealth tax. Yet mega investment manager BlackRock is prepared to stand beside them, for what appears to be nothing more than over-the-top self promotion by Labour.

The core of the Government’s self congratulation, which is repeated several times, is:

  • It shows our ambitious climate targets have the world’s attention, and that they are good for the climate, good for the economy, and will help create highly skilled jobs.
  • This is a game changer for the clean tech sector and another example of the pragmatic and practical steps the Government is taking to accelerate climate action.
  • The goal of the fund is to support NZ to become one of the first countries in the world to reach 100% renewable electricity. 

The Government’s obvious intent is  to leave the impression  BlackRock is endorsing the message. 

BlackRock should be more savvy than to get dragged into NZ politics  

Government and BlackRock promoting each other - Part 1 - Centrist
There’s nothing stopping BlackRock or anyone else from investing in NZ renewables right now.

Do they expect future favours for this, if Labour wins, which means an advantage over their competitors? What if Labour loses? To many this seems like a “friends of the Government can get an advantage” message. Is this the kind of vibe New Zealand, which prides itself for its low corruption score, wants to send?

What is real, what is hype?

BlackRock is proposing a $2b NZ focused clean energy investment fund (which the Government refers to as the New Zealand net zero Fund). “Proposed” means the money is not raised yet, let alone investments identified, although no doubt BlackRock can raise the money.

As far as can be discerned, there is no agreement between the Government and BlackRock of any kind. It is more like the Government has extended a welcome mat. And there shouldn’t be any  enticement for BlackRock to invest in NZ, because there is no shortage of money for reasonable transactions. There is also no shortage of welcome mats, so international competitors to BlackRock should be just as welcome, not to mention the local sources of finance. 

BlackRock did not need the welcome mat. It just needed to comply with the laws for foreign investors, and still does. Should people wonder if those laws are going to be loosened, if Labour is re-elected?  

BlackRock is a business that gets paid to make profitable, not aspirational, investments. Labour’s wild-eyed optimism about their aspirations may need to be reined in. Assuming the Fund does end up being created, it won’t just sign up to anything that can fit into the renewable energy label. It will have to meet BlackRock’s investment criteria. Also, to the extent there are other parties in the investment, as would be the usual case, BlackRock will have to be chosen as the best financing option. 

Feature image by Americasroof

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