Private equity firms, a type of investor with a laser-like focus on maximizing
profits, have stepped into the fray as the oil and gas business faces turmoil
due to global price swings and catastrophic climate change.
According to a recent analysis by the New York Times, the private equity
industry has invested at least $1.1 trillion in the energy sector since 2010,
more than double the total market value of the world's three largest energy
companies, Exxon, Chevron, and Royal Dutch Shell. According to data from
Pitchbook, an investment tracking website, and a new analysis by the Private
Equity Stakeholder Project, a group that advocates for more transparency in
private equity deals, the vast majority of those investments were made in fossil
fuels.
According to Pitchbook data, just approximately 12% of private equity investment
in the energy sector has gone into renewable energy, such as solar or wind,
since 2010, even though those investments have increased at a quicker rate.
Private equity investors are taking advantage of the fact that the oil industry is receiving
pressure from environmental groups, courts, and even their own shareholders to transition away from
fossil fuels, which are the primary cause of climate change. As a result, many oil corporations have
decided to sell off their dirtiest properties, which have frequently landed up in the hands of
private equity groups.
According to an investigation by the corporate accountability nonprofits LittleSis and the Private
Equity Stakeholder Project, oil and gas pipelines, coal plants, and offshore drilling sites linked
to Indigenous land violations, toxic leaks, and deadly air pollution are among the dirty energy
projects financed by some of the country's largest private equity firms.
Funds and investors buy and reorganize enterprises, including startups, struggling businesses, and
real estate, in an opaque type of financing away from public markets known as private equity.
Globally, the business manages about $7 trillion for high-net-worth individuals and institutional
investors such as mutual funds, hedge funds, endowments, and pension funds, investing in everything
from retail to healthcare to jails and weaponry.
Some of that money goes towards fossil-fuel projects that emit greenhouse gases, which contribute to
global warming. Drought, harsh temperatures, and hurricanes are all closely linked to rising air and
ocean temperatures.
Private equity businesses, unlike banks and other public trade enterprises, are exempted from most
financial transparency rules, making asset tracking extremely difficult. It implies that people with
pension funds invested in private equity funds, such as firefighters and teachers, have no way of
knowing if their money is funding coal plants, oil wells, or solar farms.
According to the investigations found by The Private Equity’s Dirty Dozen report,
The Carlyle Group, one of the world's largest private equity firms, owns a stake in NGP Energy
Capital, which has its own large portfolio focused on fracking and drilling in states such as Texas,
Wyoming, and Colorado. Carlyle, which just started a goal of net-zero emissions by 2050, is also
collaborating on at least $4 billion in equity and financing arrangements with Hilcorp Energy, a big
methane emitter with a history of offshore disasters in Alaska and the Gulf of Mexico. (Methane
traps more than 25 times the heat in the atmosphere than carbon dioxide, accounting for nearly a
quarter of current global warming.)
The Coastal Gaslink pipeline in Canada, a 400-mile, multibillion-dollar infrastructure project that
will transport fracked gas to a Pacific coast port for export to Asia, is controlled by Kohlberg
Kravis Roberts & Co (KKR). The Wet'suwet'en Nation's hereditary leaders have called for police to
clear protesters and blockades. Henry Kravis, one of the company's co-founders, gave $1 million to
Trump's inauguration fund in 2017.
The General James Gavin power station in Ohio is co-owned by Blackstone and ArcLight, the world's
largest private equity business with $731 billion in assets. Blackstone also has large ownership in
the company that operates the Dakota Access pipeline, the oil infrastructure project that sparked
the Standing Rock protest camp, where law enforcement brutalized Indigenous water protectors.
The top ten private equity companies, including Blackstone, KKR, and Carlyle, invested in energy
since 2010, as per the Private Equity Stakeholder Project. According to the research, oil, gas, and
coal make up almost 80% of existing holdings. Despite the fact that many of those companies boasted
about their long-term investments, this was not the case.
Alyssa Giachino, Pesp’s climate director and co-author of the report, said: “While communities have
shouldered the harms from fossil fuel investments, private equity firms have built vast wealth. Many
firms have adopted rhetoric around sustainability, but have yet to provide transparency on their
holdings and impacts.”
In recent decades, private equity firms have grown in strength and secrecy as an investment force.
They usually combine large sums of money from rich or institutional investors to invest directly in
businesses, which are often in crisis and unable to raise funding through more traditional means. It
might be difficult to acquire a complete picture of a company's holdings or climate because the
corporations are only required to publish limited information.
The findings have reignited calls for more transparency in the burgeoning private equity industry so
that people suffering from hazardous pollution and harsh weather can track the money that is fueling
their suffering.
However, there are some indications that things are changing. Private equity investment in
renewables has grown at almost three times the rate of investment in fossil fuels since 2010,
according to Pitchbook data, albeit from a significantly smaller base. Last year, a drop in oil
demand caused by the Covid-19 epidemic resulted in the fewest fossil fuel agreements among the top
10 private equity firms since 2011, while investments in renewable energy companies increased.
Rising oil and gas prices, on the other hand, may assist renewable energy projects to become even
more competitive with fossil fuel projects, as higher power prices may help boost demand for new
wind or solar projects among utilities and others seeking to protect themselves from market swings.