Private equity firms are using US public sector workers’ retirement savings to fund fossil fuel projects, a new analysis reveals. These projects pump over a billion tonnes of greenhouse gases into the atmosphere each year.
Since 2010, private equity firms have invested more than $1tn in the energy sector. Many of these investments are in fossil fuel projects, both old and new. Due to limited financial disclosure requirements, many of these operations remain hidden from public scrutiny.
Researchers from the Americans for Financial Reform Education Fund, Global Energy Monitor, and Private Equity Stakeholder Project conducted the study. They assessed the energy holdings of 21 private equity firms managing a combined $6tn in assets. The analysis revealed that these firms fund projects responsible for more than 1.17bn tonnes of CO2 emissions annually.
The study highlights a troubling trend. Private equity firms often buy older, dirtier energy assets as large oil and gas companies shed them. Due to regulatory loopholes and limited disclosure rules, some of the most carbon-intensive assets now belong to lesser-known firms.
EIG, a private equity firm, ranked the worst in the analysis, holding 23 fossil fuel companies in its portfolio. EIG’s upstream emissions are estimated at more than 255m tonnes of CO2 annually. The Carlyle Group came in second, with an estimated 214m tonnes of CO2 emissions each year. Carlyle holds 23 fossil fuel companies, which make up more than three-quarters of its energy investments.
Critics argue that these investments jeopardize public sector workers’ futures by risking serious damage to the climate. Pension fund managers are often unaware of the environmental risks their beneficiaries’ savings face. This lack of transparency raises concerns about the ethical and financial implications of these investments.
Private equity firms have long been known for cost-cutting measures. This can lead to safety risks, reliability concerns, and environmental violations in the fossil fuel sector. The researchers call for greater transparency and stronger regulations to address these issues.
Carlyle responded to the report, stating that it is focused on investing in the energy transition. Carlyle claimed it is committed to reducing emissions across its portfolio and not simply divesting from high-carbon assets. EIG did not comment on the findings.
The report raises important questions about how pension funds are being used to support fossil fuel projects and the long-term impacts on the planet.