Blackrock tells investors to give mining a chance or risk green energy transition
Asset management giant Blackrock said that reluctance to invest in the mining sector may threaten the green energy transition as it could starve the sector of cash and lead to shortages of vital materials.
The world’s biggest fund manager warned that demand for metals used in energy transition is set to surpass all prior estimates and that funding needs to flow into the industry to ensure their adequate supply.
“If people don’t give this sector a chance, then the energy transition is going to be impeded by the scarcity of materials to build everything required,” Evy Hambro, global head of thematic and sector-based investing at BlackRock, told the Financial Times.
Despite rising profits and an expected boom in demand, mining stock valuations have struggled since investors remain wary about the sector’s cyclical nature.
Sector heavyweights such as BHP, Rio Tinto, Glencore and Anglo American have an average price to forward earnings ratio of 8.5 times, compared with 18.5 times for the S&P 500, according to analysis by S&P Capital IQ and Refinitiv.
“The further you get away from upstream from the renewable power companies, the lower the multiples go,” Hambro said. “But you can’t have the renewable power companies or electric-vehicle manufacturers without everything upstream of them.”
Blackrock’s environmental, social and governance (ESG) strategy has been under scrutiny over that past year.
The company, which holds $9.4 trillion in assets under management, voted in favour of just seven per cent of its 26 climate plans at annual meetings in the 12 months to June, marking a sharp decline from last year when 22 per cent voted in favour.
Blackrock chairman Larry Fink has even stopped using the term ESG claiming it had become too politicised.