Tracking the low-carbon transition

A major structural shift

The transition to a low-carbon economy is among a handful of major structural shifts that we see rewiring economies, sectors and businesses. These mega forces, which also include the rise of artificial intelligence and geopolitical fragmentation, are unfolding in decades to come – and are already playing out in markets today. Their effects create complexity, risk and opportunity for companies and investors. Robust research and continuous tracking of these mega forces is necessary, in our view, to assess probable outcomes and help guide investment decisions.

We have created the BlackRock Investment Institute Transition Scenario (BIITS), powered by Aladdin® technology: a research-based, analytical forecast of how the low-carbon transition could unfold. Its value is not in the forecast itself, but how it can be used as a compass to help investors navigate the transition’s risks and opportunities. It will not dictate how BlackRock invests client assets. It is the client’s choice whether to include the BIITS view into their own investment processes as we recognize views on the transition differ. The BIITS can help inform that choice.

The BIITS focuses on what is most likely to occur – rather than on what anybody thinks should happen or a specific outcome. We have based its key assumptions on rigorous research, and the input of BlackRock’s portfolio managers and other experts. The low-carbon transition’s speed and shape are highly uncertain. The BIITS cannot capture all the transition’s drivers and all the ways physical climate events affect the economy and markets. We approach this process with humility, knowing we may be wrong about some aspects. We aim to monitor how the transition unfolds and plan to recalibrate our

Authors:

• Philipp Hildebrand, Vice Chairman – BlackRock
• Sudhir Nair, Global Head of Aladdin – BlackRock
• Mark Wiedman, Head of Global Client – BlackRock
• Jean Boivin, Head – BlackRock Investment Institute
• Jessica Tan, Head of Sustainable Transition Solutions – BlackRock