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Larry Fink fears for energy transition, warns of market arbitrage


LONDON — Larry Fink, chair and CEO of BlackRockAccording to, the energy transition to greener power must be completely rethought.

Fink was speaking at the Green Horizon Summit that CNBC’s Julianna Tabelbaum hosted during the COP26 Climate Conference in Glasgow, Scotland. Fink praised companies for increasing emissions reporting, while criticizing oil firms for selling part of their businesses off to private investors. Fink also said this could lead to huge market arbitrage.

“We cannot ask public companies just to do their jobs without the support of the whole society. This will create capital market arbitrage at its greatest. More hydrocarbons are being sold to private companies than at any other time in recent years. This doesn’t make the world any better. It actually makes it, the world even worse, because it moves from public disclosed companies to opaque private enterprises. He stated that the mission was failing “if you do this all.”

Arbitrage is a market failure that allows investors and companies to make a profit.

Oil companies are selling some of their most polluting assets, which creates a more green narrative for shareholders. Fink explained that those assets exist and are more opaque in private hands. Fink stated, “That’s not going to change to a net zero world. “That’s just window dressing. That’s greenwashing.” he said.

Fink suggested that one solution is to make new financial vehicles to spin off oil assets. An energy company would then commit all proceeds to the purchase of green technology. We need these vehicles just like the ones we created during. [the]Financial crisis with banks: We need to create new tools, new thinking processes,” he stated.

Fink stated that BlackRock, which is the largest money manager in the world, “works with them, and not against them” when it comes to its relationships with oil companies. The key for hydrocarbon companies is to move rapidly towards a less carbon-intensive business model. They are, however, the most important source of energy in a society still dependent on it.

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Fink stated, “We have to rethink how we could quickly deploy new capital into greening the world but not avoid hydrocarbons for the short term or we’ll have $120 and $140 oil. This is not a fair transition.”

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