Private Equity Gets Failing Grades on Climate Risk Exposure

Businessmen shaking hands in front of an oil refinery
Private equity firms have continued to invest billions of dollars in fossil fuel projects, with no exit strategy. x-reflexnaja / iStock / Getty Images Plus
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Private equity firms are exposing investors, including retired teachers, nurses, and firefighters, to unknown levels of financial risk by continuing to invest billions of dollars in fossil fuel projects, with no exit strategy, a new report concludes.

The analysis, from Americans for Financial Reform Education Fund and the Private Equity Stakeholder Project, finds private equity firms — which are largely immune to financial disclosure rules — have poured billions of dollars into fossil energy projects since 2010, despite many publicly claiming to support climate action.

Carlyle, Warburg Pincus, and KKR were the worst offenders of the eight firms reviewed. Three-quarters of Carlyle’s energy investments are in fossil fuels and KKR has said it will continue to invest in fossil projects.

“Private equity firms have created large climate risks for the investors providing the capital, especially as they act as fiduciaries of public sector workers’ retirement savings. As societal sentiment grows in support of a clean energy economy, the risk of doubling down on dirty energy assets is becoming clear,” Riddhi Mehta-Neugebauer, climate research director for PESP, told The Guardian.

As reported by Bloomberg:

“The industry is operating in the shadows,” said Alyssa Giachino, research and campaign director at the nonprofit Private Equity Stakeholder Project. “The remedy is transparency.”

Most private-equity managers aren’t tracked by financial regulators because private markets are exempt from most public disclosures, Giachino said. This lack of transparency deprives the public and investors of a true picture of the damage inflicted by private equity on the planet and human health, she said.

For a deeper dive:

The Guardian, Bloomberg

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