Temasek and BlackRock have agreed to establish a partnership that will launch a series of late-stage venture capital and early-growth private equity investment funds to advance decarbonization solutions and accelerate global efforts to achieve a net zero economy by 2050.

The two firms will commit a combined US$600 million as initial capital to invest in multiple funds, which will also raise third-party capital from investors who are committed to achieving a net zero world while seeking long-term sustainable financial returns. The initial target for the first fund is US$1 billion, including capital from the two partners.

Calling themselves the “decarbonization partners”, Temasek and BlackRock say climate transition presents a significant investment opportunity. The two firms will combine their expertise in private markets to invest in companies and proven technologies that will reduce and potentially eliminate carbon emissions.

BlackRock chairman and chief executive officer Larry Fink says: “The world cannot meet its net zero ambitions without transformational innovation. For decarbonization solutions and technologies to transform our economy, they need to be scaled. To do that, they need patient, well-managed capital to support their vital goals. This partnership will help define climate solutions as a standalone asset class that is both essential to our collective mission and a historic investment opportunity created by the net zero transition.”

Temasek International CEO Dilhan Pillay adds: “Bold, aggressive actions are needed to make the global net zero ambition a reality. Decarbonization Partners represents one of several steps we are taking to follow through on our commitment to halve [greenhouse gas emissions, from 2010 levels] from our portfolio by 2030, and ultimately move to net zero emissions by 2050. Through collective efforts with like-minded partners, we will be able to create sustainable value for all of our stakeholders over the long term, and investors will have the opportunity to help deliver innovative solutions at scale to address climate challenges.”

The funds will focus on early-stage growth companies targeting proven, next-generation renewable and mobility technology including emerging fuel sources, grid solutions, battery storage, and electric and autonomous vehicle technologies as well as in building and manufacturing sectors to drive decarbonization, resource efficiencies, and material and process innovation.

The partnership will leverage both firms’ expertise in sourcing and underwriting private investments, portfolio and risk management, and sustainable technology and analytics. The funds will be staffed by employees from both firms, as well as a professional and dedicated team recruited to source and undertake investments and manage the portfolio.