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.
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.
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.
Carlyle is rated F, the lowest in the climate credentials scorecard that has been created by the Private Equity Stakeholder Project (Pesp) and Americans for Financial Reform Education Fund (Afref).
More than three-quarters of Carlyle’s energy investments are in fossil fuels, and just over 60% of its 2022 first profits came through its subsidiary NGP Energy Capital, which focuses almost exclusively on oil and gas projects.
Last year Warburg Pincus announced that it would not seek further fossil fuel investments in its next buyout, yet since then its dirty energy portfolio has expanded.
KKR, one of the world’s wealthiest private equity firms, has said it will continue to invest in fossil fuel projects despite publishing a climate action strategy.
Among the worst downstream polluters is Blackstone, which also scored a D rating, with its power plants emitting a combined 18.1m metric tonnes of planet-warming carbon dioxide in 2020 – equivalent to the annual emissions of nearly 4m gas-powered cars, according to the report.
Higher atmospheric and ocean temperatures are directly linked to the rise in catastrophic events such as drought, extreme temperatures and hurricanes, which in 2021 cost $152.6bn in the US alone.
“The scorecard provides important information and analysis that can help investors and communities understand what these firms are doing, and makes very clear that the firm’s climate commitments are largely empty words, said Oscar Valdes Viera, research manager at Afref and co-author of the climate risks scorecard.
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…
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