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BlackRock is set to invest $550mn into the world’s biggest direct air capture project, which is being developed by Occidental Petroleum, in a sign of growing investor confidence in the nascent technology.
The companies said on Tuesday they would form a joint venture to develop Stratos, a project under construction in west Texas that aims to extract carbon emissions from the atmosphere.
“This joint venture demonstrates that direct air capture is becoming an investable technology and BlackRock’s commitment in Stratos underscores its importance and potential for the world,” said Vicki Hollub, chief executive of Occidental, one of the biggest US oil companies.
It is one of the biggest-ever investments in the technology and a boon for Occidental, whose largest shareholder is Warren Buffett’s Berkshire Hathaway.
The company is betting that carbon management will come to play a significant role in global decarbonisation efforts. Direct air capture — or DAC — sucks CO₂ emissions out of the air to be buried underground or reused in building materials, agricultural products or fuels, rather than contribute to global warming by lingering in the atmosphere.
The International Energy Agency has said the technology will play “an important and growing role” in setting the world on course to achieving net zero goals as economies continue to burn fossil fuels. But it is not proven at scale, and some environmentalists worry it will slow the transition to cleaner forms of energy.
BlackRock is investing through its fourth global infrastructure fund, which focuses on climate-related projects including those that help brown industries become greener. Last year it raised $4.5bn towards an eventual $8bn goal from global pension funds, insurance companies and sovereign wealth funds. BlackRock emphasised that it was putting money into the Occidental project because of the potential for significant returns.
“Occidental’s technical expertise brings unprecedented scale to this cutting-edge decarbonisation technology,” Larry Fink, BlackRock chief executive, said in a statement. “Stratos represents an incredible investment opportunity for BlackRock’s clients . . . [and] underscores the critical role of American energy companies in climate technology innovation.”
The $9.1tn money manager’s use of environmental factors in investing has made it a target for Republican politicians, who accuse it of boycotting fossil fuel and being “woke”. Climate activists, meanwhile, are angry that BlackRock voted against most climate-related shareholder resolutions this year, saying the proposals were overly prescriptive. BlackRock and Fink insist that the fund manager puts investor returns and requirements first.
Stratos — which is designed to capture up to 500,000 tonnes of carbon a year — is about 30 per cent complete, according to Occidental, with commercial operations expected to begin in 2025.
In August, another Occidental DAC development was among the winners of a $1.2bn award from the Department of Energy, as the Biden administration looks to expedite commercialisation of the technology as part of its drive to decarbonise the economy.