Mark Carney: Energy transition ‘will need forms of blended capital at scale’

Blended capital has a key role to play in facilitating the energy transition in emerging markets, according to Brookfield chairman Mark Carney.

Speaking at Infrastructure investor Network’s Global Summit in Berlin, Carney – a former Private Equity International gamechanger of the year – said that while transition investing is “mainstreaming”, more needs to be done to meet environmental objectives.

“Countries have to want to transition,” he said. “So we’re not going to force ourselves on somebody who hasn’t made the commitment and isn’t starting to put in place the policies that are consistent with that. But then on top of that, because of risk premium, because of lack of track record, lots of other issues… we will need forms of blended capital at scale.”

Previously governor of both the Bank of England and Bank of Canada, Carney joined Brookfield in 2020, where he also serves as head of transition investing. Under his leadership, the firm has gathered the largest pool of impact capital in the world when it raised its first Global Transition Fund at $15 billion; its second Global Transition Fund reached a $10 billion first close earlier this year.

Carney pointed to Altérra, the $30 billion climate vehicle announced by United Arab Emirates minister of industry Sultan Al Jaber at COP28, as an example of what is needed. Of the $30 billion commitment, $25 billion is earmarked for “climate investments at scale” in a programme named Altérra Acceleration, which will make direct investments and commit to funds. The remaining $5 billion is catalytic capital focused on the Global South in a programme named Altérra Transformation.

Alterra has committed $2 billion to BGTFII from its Acceleration bucket – the largest ever single LP commitment to a private impact fund – as well as $1 billion anchor commitment to Brookfield’s forthcoming Catalytic Transition Fund, which will invest in emerging markets, from its transformation platform.

“Full credit to the UAE presidency,” Carney said. “They put $30 billion on the table for transition of their money, $5 billion of which is dedicated catalytic capital for the emerging and developing world… what’s important about this capital is it has a capped return and therefore augments the returns for the LPs.

“It attracts other forms of supportive capital. For example, capital for project preparation or capital that’s dedicated to specific regions in order to accelerate the transition there. And so there’s an opportunity to create a capital stack and do exactly what it’s supposed to do, which is to catalyse and pull forward the transition in these markets and start to build really an industry pipeline at scale for them.”

However, Carney also stressed that catalytic capital alone will not be sufficient to meet the transition needs of developing markets. “I do think that in many situations, we will also need to have carbon markets on top of those types of capital structures,” he said.

Data driven

Carney also how discussed the role that the growing demand for power for digital infrastructure assets is accelerating the demand for renewable energy. He said: “Look at what’s happening on the data side and AI and the explosion in demand that we’re seeing for data centres. But virtually every data centre for the hyperscalers has to come with clean energy.”

As a result, Carney said that across Brookfield’s renewables business, approximately 30 percent of investments have offtake agreements in place with corporates, double the amount of five years ago.

“In the next five years, we expect it to be half of the total,” he added.