Private equity refers to an opaque form of financing away from public markets in which funds and investors buy and restructure companies including startups, troubled businesses and real estate operations. Globally, private equity manages trillions of dollars for wealthy individuals and institutional investors such as mutual funds, endowments and pension funds. The industry has invested an estimated $1tn in the energy sector since 2010, and while there’s been growth in renewables, the lion’s share is still in oil, gas and coal. Unlike banks and other publicly listed companies, private equity firms are exempt from most financial disclosure rules, making it extremely difficult to track their assets – or risks. This means ordinary workers like firefighters, nurses and teachers – whose pension funds are invested in private equity funds – have little way of knowing if their retirement nest egg is tied up in fossil fuels, which scientists warn must be phased out to limit the extent of global heating.
Private equity firms pumping billions of dollars into dirty energy projects are exposing investors, including pensioners, to unknown financial risks as the planet burns and governments face escalating pressure to act, new research finds.
The first-of-its-kind climate risks scorecard ranks Carlyle, Warburg Pincus and KKR as the worst offenders among eight major private equity companies with significant fossil fuel portfolios. All three continue investing heavily in greenhouse-gas-emitting projects with no adequate plan on transitioning away from oil and gas, according to the analysis by two financial watchdog non-profits of publicly available information. The firms also have scant transparency on political and climate lobbying, the report finds. The eight firms on the scorecard manage a combined $3.6tn in assets including about $216bn in energy projects – an amount equivalent to the fossil fuel financing by the world’s five biggest banks last year.
More than three-quarters of Carlyle’s energy investments are in fossil fuels, and just over 60% of its 2022 first half profits came through its subsidiary NGP Energy Capital, which focuses almost exclusively on oil and gas projects.
KKR, one of the world’s wealthiest private equity firms, has said it will continue to invest in fossil fuel projects