Brief:
In a startling revelation, the energy portfolios of 21 prominent private equity firms have a staggering carbon footprint, estimated at a minimum of 1.17 billion metric tons of carbon dioxide equivalent annually. This ominous figure emerges from an investigation published on Wednesday, spotlighting the firms’ investments in fossil fuels, coal-driven energy, and liquefied natural gas.
Collectively managing an eye-watering $6 trillion in assets, these firms allocate approximately 67% of their energy portfolios to fossil fuel ventures. This level of investment produces emissions comparable to the catastrophic Canadian wildfires of 2023 and surpasses the total emissions from all global air travel recorded in 2019.
Among those scrutinized in this year’s Private Equity Climate Risk Scorecard are heavyweight players such as Apollo Global Management, KKR, Ares Management, as well as Blackstone and BlackRock’s private equity unit. Notably, BlackRock completed a significant acquisition of Global Infrastructure Partners just last week.
Insight:
This critical report stems from a collaboration between three nonprofit organizations: Americans for Financial Reform Education Fund, Global Energy Monitor, and the Private Equity Stakeholder Project. It meticulously ranks the 21 firms based on their fossil fuel asset ownership, the emissions generated by these holdings, and their strides toward embracing a green transition with definitive decarbonization targets.
Other notable firms included in this assessment are NGP Energy Capital Management, backed by The Carlyle Group; ArcLight Capital Partners; Brookfield’s Oaktree Capital Management; and numerous others like EIG Global Energy Partners and TPG Inc.
Among the firms evaluated, Apollo, EQT, Macquarie, and TPG emerged with commendable “B” ratings—representing the highest scores on the scale—with fossil fuel investments comprising 60%, 17%, 64%, and 38% of their energy portfolios, respectively. Conversely, EIG Global Energy Partners faced an alarming “F” rating, with a staggering 82% of its portfolio anchored in fossil fuel assets, generating over 271.8 million tons of carbon dioxide equivalent each year. As of July, their investments spanned 23 fossil fuel companies, including multiple LNG terminals and upstream oil and gas ventures.
Amanda Mendoza, the senior climate research and campaign coordinator at the Private Equity Stakeholder Project, articulated her concerns starkly: “Private equity firms and their executives are making billions by investing public employees’ retirement money into planet-destroying fossil fuel assets." Her statement underscores the ethical implications, emphasizing that these corporate giants reap profits while effectively evading accountability for the harm inflicted on vulnerable communities.
The report also brings to light an unsettling trend: the ballooning investment in private markets has been accompanied by a worrying drop in transparency regarding the climate impacts of these assets. Since most private equity firms fall outside standard regulatory frameworks, crucial information is often obscured, leaving regulators blind to the potential risks posed by these influential buyout firms.
The authors of the report assert that these private equity entities are compounding the climate crisis. They persist in channeling funds into “polluting portfolios,” which directly contradicts the guidance established by international policymakers and climate scientists, who aim to restrict global warming to a mere 1.5 degrees Celsius, as stipulated in the Paris Agreement. The implications of such investments are profound, presenting significant obstacles to achieving global climate goals.