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The remainder of 2024 looks set to be volatile, with geopolitical tensions and a major election in the US likely to create noise. The energy sector is always vulnerable to short-term shifts in sentiment and changing views on the outlook for global growth, but the long-term trends are strong, as demand expands and supply remains constrained. 

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The BlackRock Energy and Resources Income Trust (BERI) is a specialist mining and energy investment trust covering three key areas – renewable energy, traditional energy and mining. We see pockets of strength in all of them in the coming months, but each has its own nuances and requires selectivity.

Investing in renewables

The energy transition has been a more difficult area in recent years. The share prices for many energy transition companies saw a significant boom during the pandemic, leaving valuations elevated. There have also been concerns around rising development costs for many companies, which has seen projects stall. There was an adjustment in 2023, which has brought prices down to more realistic levels.

At the same time, demand for renewable energy remains strong, as costs fall, and social and regulatory pressures increase for action on climate change. It is becoming more attractive – and realistic – for companies and households to move away from the incumbent fossil fuels to renewable fuels. By 2030, around 50% of the global electricity mix will come from renewables^[1].

Even though some governments have pared back their climate ambitions, the move to renewables is still at the forefront of regulation and government spending, with major initiatives such as the EU green deal and Inflation Reduction Act. In spite of some minor set-backs, most individual governments around the world are still supportive of the transition.

Investing in mining and energy

People think of the mining and energy sectors as being ‘at risk’ from the move to renewables. Across both sectors, there remains underinvestment in new supply, and it continues to lag demand, which has remained resilient in spite of the slow opening of China. Strong growth in the US has compensated to some extent.

On the energy side, US shale production has proved much more resilient than our initial market expectations. The strength of Russian output has also been surprising. However, there has been a real restriction in reinvestment elsewhere in energy markets. As a result, US strategic petroleum reserves and spare capacity are at multi-year lows.

It is becoming increasingly clear that governments across the world will not be able to reach their renewable energy targets without investing in some of the commodities that are enabling this change, including steel, nickel and copper. This is where BERI is focused on the mining part of the portfolio.

Supply remains tight and there is strong capital discipline from the mining companies. This is helping to keep prices elevated. The lack of reinvestment in some of these mines is an issue. Supply can often take 20 years to come on stream and the tight supply environment is likely to be sustained. The mining companies have paid down debt and focused on capital discipline in recent years. These assets generate significant cash flow, which is being returned to shareholders in the form of dividends and share buybacks.

This year won’t be easy. There will be some volatility around underlying commodity prices and on the energy transition side. But there are strong tailwinds behind these sectors and continued regulatory support. We see some volatility over the year, but there are some exciting opportunities for BERI, particularly with its ability to invest flexibly across the energy transition, traditional energy and mining sectors.

For more information on this Trust and how to access the potential opportunities please visit: www.blackrock.com/uk/beri

Risk warnings

Investors should refer to the prospectus or offering documentation for the funds full list of risks.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Description of Fund Risks

Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.

Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.

Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.

Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Investments in Mining Securities: Investments in mining securities are subject to sector-specific risks which include environmental concerns, government policy, supply concerns and taxation. The variation in returns from mining securities is typically above average compared to other equity securities.

Important Information

In the UK this is issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

UK Investment Trust Funds: This document is marketing material. The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.

The investment trusts listed above currently conduct their affairs so that their securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to nonmainstream investment products and intend to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are securities issued by investment trusts. Investors should understand all characteristics of the funds objective before investing. For information on investor rights and how to raise complaints please go to https://www.blackrock.com/corporate/compliance/investor-right available in local language in registered jurisdictions.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at www.blackrock.co.uk/its. We recommend you seek independent professional advice prior to investing.

Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

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MKTGH0324E/S-3434455

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