October 5, 2022
Movement for a return to fossil fuels is coming for the private equity industry

Wall Street banks and investors face mounting divestment pressure fossil fuelAccording to climate activists, the huge private equity industry is taking their place. According to a recent one, the eight biggest buyout firms have put almost as much money into coal, oil and gas as the big banks. analysis From the Private Equity Stakeholder Project and the Americans for Financial Reform Education Fund (AFREF).

The firms, which include Apollo Global Management, Blackstone Group, Brookfield Asset Management, Carlyle Group, KKR and Warbug Pincus, collectively oversee $216 billion worth of fossil-fuel assets — a measure of how much big banks invested in fossil fuels last year. Money was invested, non-profit groups got it. Looking at the 10 largest private equity funds, it was found that 80% of their energy investments were in fossil fuels.

“The billions of dollars private equity firms deploy to drill, frac, transport, store, refine fossil fuels and generate energy are what climate scientists and international policy makers have deployed to align our trajectory to 1.5°C warming. is asked to stand opposite. landscape,” says report goodWhich was co-signed by major climate groups including Greenpeace, the Natural Resources Defense Project, the Sierra Club and the Sunrise Project.


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“Pollution Financier of Last Resort”

Oscar Valdés Viera, research manager at AFREF, told CBS MoneyWatch that banks, utilities and other public companies have sold off polluting assets, with private equity firms “emerging as the pollution financiers of last resort”.

Riddhi Mehta-Neugebauer, research director at Private Equity Stakeholders, said, “These polluting assets are shifting from public markets, where there is a high degree of regulatory and public scrutiny, to the shadow of our financial industry, where private equity typically operates. ” Project.

For example, PSEG, a New Jersey-based utility that aims to reach net-zero emissions by 2030, recently sold 13 fossil-fuel power plants to Arclight Capital Partners, a private equity firm.

Brookfield Asset Management recently bought oil pipelines Canada and liquefied natural gas facilities louisiana, Warburg Pincus buys oil and gas wells through Citizen Energy Oklahoma, KKR, through subsidiaries, invests in oil and gas production in Texas, Utah And Canada,

According to the report, Blackstone Group – one of the largest private equity funds in the world – is also one of the worst polluters. In 2020, PESP calculated that Blackstone-supported power plants produced 18.1 million metric tons of carbon dioxide emissions, the same as 4 million gasoline-burning cars.

Warburg Pincus and KKR disputed their portrayal in the report, stating that they did not wrongly attribute the property to them. In a statement, Brookfield said, “We are proud to be one of the world’s largest renewable energy operators and the manager of the world’s largest climate impact fund,” adding that it plans To achieve net-zero emissions in its portfolio by 2050.

Blackstone did not respond to a request for comment from CBS Moneywatch.


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net zero – finally

While some PE firms have pledged to eliminate the carbon, environmentalists say they may move more quickly.

Carlyle Group, which earlier this year Mortgage To have net-zero emissions by 2050, the NGP still maintains $24 billion in carbon-based energy through the group, in which it holds a stake, according to the report, which said the first 60% of Carlyle’s profit came in the half year. from NGP.

A Carlyle executive said the company does not control NGP’s activities, and disagreed with environmentalists’ timeline on how soon it is possible to retire fossil-fuel plants.

“Carly’s approach to investing is not that different from the energy transition, a different one, which calls for real emissions reductions within portfolio companies over the long term,” the company said in a statement. “To work toward meaningful progress on climate change, we will continue to partner with companies across the energy spectrum to collect better data and strive for clearer progress toward reducing greenhouse gas emissions.”

The executive cited several examples of Carlyle’s environmental push, noting that the company has shut down owned coal plants and pushed oil and gas companies. sepsa and to move Varo Energy to renewable energy.

Carlyle announced february That it will reach a net-zero portfolio by 2050. However, in the past year – with rising energy prices and now Russia’s war Ukraine – focused on the fund energy security As much as stability, the executive said. That means keeping natural-gas plants online for longer than initially planned.

Broadly speaking, private equity firms say their investments in thousands of companies across the US, including many small and medium-sized employers, help keep struggling businesses afloat and preserve jobs.

Will they listen?

Over the past decade, activists have had considerable success in pressuring major banks and money managers to move funding from fossil fuels to the point where republican state Trying to ban the practice.

But private equity firms – which raise and manage investment funds on behalf of large investors, including public pension plans – are more resistant to public criticism. also called buyout firmHe has largely denied the allegations expanding community hospitals And private hospital, dodge local newspapersand destroy the popular Retailers like Toys R’ UsContinuing with the PE Industry thrive,

Sherrod Brown speaks on a stage surrounded by protesters
Lawmakers in Washington, DC introduced the “Stop Wall Street Looting Act” in 2019. This would make private-equity firms responsible for the debt and retirement pension obligations of the companies they buy, while making their profits dependent on the success of the entities they control.

Andrew Harrer / Bloomberg via Getty Images


“Banks are accountable to their shareholders and the public — companies are accountable in the same way, but private equity firms are only accountable to their limited partners,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research. Referring to investors in buyout funds.

Typically, limited partners sign on with a private equity fund manager without knowing what that person plans to buy. Once they are invested, they have no way of saying how they are managed or when they will be sold.

“In private equity, you’re investing in what we call a blind pool – you’re committed to the fund, but you don’t know what you’re buying because the private equity firm doesn’t know what they’re going through.” Have yet to buy,” said Hilary Weeks, principal analyst for fund strategies and performance at PitchBook. “They first need to raise their funds, and then they go out and find investments.”


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Wiek noted that some PE investors are coming around to the idea of ​​decarbonization, and investors today are more concerned about the climate impact of their portfolios than they were a few years ago.

But with deadly heat waves, wildfires and flooding killing thousands this year, protecting fossil fuels can’t come soon enough, critics say. Many of the institutions currently funding fossil fuels have promised to stop one generation in the future, by 2050. But a typical private-equity fund only owns a company for three to five years before it is sold.

“Private equity firms have very short time frames,” said PESP’s Mehta-Neugebauer. “If they’re holding on to these companies for just three to five years, they can probably still have a fossil-free portfolio by the end of this decade.”

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