It’s Not Easy Being Green
It’s inevitable: Private equity will play an integral role in the global energy transition. These private investment firms have already backed over $25 billion in energy transition deals, with many boasting plans to invest substantially more in the sector.
But as institutional investors such as pension funds grow their allocations in private equity funds, public workers’ retirement savings become more exposed to climate-related financial risk.
With more than one trillion dollars in energy investments, private equity firms have continued to accelerate the climate crisis while evading accountability from investors, policymakers, regulators, and the public.
Those were the findings of a new report from the Private Equity Climate Risks consortium, consisting of the Americans for Financial Reform Education Fund, Global Energy Monitor, and the Private Equity Stakeholder Project.
In 2023, the private equity sector was responsible for nearly 1.2 billion metric tons of carbon dioxide-equivalent emissions. The companies owned by the twenty-one firms featured in the report had more emissions than the entire global aviation industry last year, rivaling the emissions caused by the 2023 wildfires in Canada, which covered large swathes of the United States with a suffocating, amber haze.
In its report, the consortium, along with more than a dozen civil society groups, outlined a series of demands calling on private equity firms to align with science-based climate targets keeping in mind several goals: Limit global warming to 1.5 degrees Celsius and disclose fossil fuel exposure, emissions, and impacts; report portfolio-wide energy transition plans; integrate climate and environmental justice; and provide transparency on political spending and climate lobbying.
By examining the individual energy companies owned by private equity firms, the report provides details that allow investors to better understand the risks to which they may be exposed and the real-world impacts of the emissions of these companies on communities, climate, and the global economy.
“Without this specificity, it is common for private equity firms to obscure or entirely omit the financed emissions and other local impacts of energy sector investments from the firms’ public . . . sustainability reports, statements, and announcements,” the report explains.
The consortium accused firms like the Carlyle Group, which manages $435 billion in assets, of excluding certain fossil fuel holdings from their disclosures. In February 2022, Carlyle announced plans to achieve net zero greenhouse gas emissions across all of its portfolios by 2050 or sooner.
“Carlyle remains focused on investing in the energy transition, not divesting from it,” a spokesperson for the firm tells The Progressive. “We are committed to achieving real emissions reductions across our portfolio, rather than shifting high-carbon assets to others.”
Another asset management firm, EIG Global Energy Partners, with almost $25 billion in assets under management, was the only firm to receive an “F” rating, meaning it was responsible for the highest overall emissions out of any firm in the report.
As of July 2024, 82 percent of EIG’s energy portfolio was invested in fossil fuel companies producing 271.8 million metric tons of CO2 emissions annually. EIG did not respond to requests for comment.
According to the consortium’s findings, in addition to EIG, firms with more than 80 percent of their energy portfolios invested in fossil fuel companies included Blackstone and ArcLight Capital Partners, among others. Blackstone and ArcLight have assets under management of $1 trillion and $696 billion, respectively.
“We are proud to be one of the most significant investors in the energy transition globally,” a Blackstone spokesperson tells The Progressive. “We are equally proud of our leading Emissions Reduction Program, which serves as our platform to actively engage in decarbonization opportunities across participating portfolio companies and assets.”
Blackstone accused the Private Equity Stakeholder Project of “artificially inflating the emissions figures they cite,” alleging the report incorrectly linked the firm to a number of fossil fuel assets in which it had never invested. Blackstone also claimed the report downplayed the firm’s energy transition investments.
ArcLight did not respond to a request for comment.
Blackstone and ArcLight own Lightstone Energy, a company that operates the coal-fired Gavin power plant in Cheshire, Ohio. Amanda Mendoza, senior research and campaign coordinator at the Private Equity Stakeholder Project, described Gavin at a press conference as “the deadliest coal plant in the United States.”
“Once a thriving little town, the entire community surrounding the plant was bought out and bulldozed by the polluters,” Mendoza tells The Progressive. “Unfortunately, it’s just one of the many communities that have suffered at the hands of [private equity firms] still investing heavily in fossil fuels.”
Last month, Energy.Media, an intelligence service covering deals in the energy sector, reported that Blackstone and ArcLight have agreed to sell Lightstone to Energy Capital Partners, a private equity firm with $19 billion in assets under management. However, the deal has not yet closed.
Mendoza bemoaned the decision to sell Lightstone, criticizing the company’s current owners for not decarbonizing or “responsibly retiring” the plant.
According to a source familiar with the matter, Energy Capital Partners intends to decarbonize or retire the Gavin power plant by 2031. The firm declined to comment.
Energy Capital Partners was also featured in the report and received a “C” rating. In May 2024, the firm closed its most recent flagship fund, ECP V, valued at $6.7 billion. ECP V targeted investments in the energy transition. Despite this, the firm ranked seventh in the University of Massachusetts, Amherst, Political Economy Research Institute’s 2023 Greenhouse 100 Polluters Index.
Blackstone also received a “C” rating in Private Equity Stakeholder Project’s latest scorecard, which came just two months after the release of an August 2024 report from the group detailing private equity’s acquisition of agencies that provide outsourced labor for energy companies.
Specifically, the Private Equity Stakeholder Project’s August 2024 report focuses on Blackstone’s acquisition of Tradesmen International in January 2017.
Although Blackstone no longer owns the company, Tradesmen International has incurred at least fifteen citations from the Occupational Safety and Health Administration (OSHA) since January 2017. The company also faces allegations of anti-union conduct, unfair labor practice charges filed with the National Labor Relations Board (NLRB) show.
According to a spokesperson for Blackstone, Tradesmen International “took its commitment to safety and compliance incredibly seriously” under Blackstone’s ownership, establishing a dedicated safety department and offering OSHA training for all employees.
“We have long encouraged our portfolio companies to adopt and maintain strong workforce management principles,” the spokesperson tells The Progressive, adding that the firm has also formalized a set of workforce principles to guide its efforts.
The Private Equity Stakeholder Project’s August 2024 report also highlights the acquisition of SOLV Energy—a North American renewable energy solutions provider—by the private equity firm American Securities in December 2021. The company subcontracts with Aerotek, a temporary staffing agency employing thousands of workers across North America.
Since the acquisition, SOLV has been embroiled in controversy.
Not only has the company been accused of recruiting out-of-state workers and paying them substantially lower wages for a solar farm project in Indiana, but it has faced scrutiny from the NLRB for allegedly retaliating against workers attempting to organize. The company has also been hit with at least four OSHA citations, one of which was concerned with the death of a twenty-three-year-old worker in California last year.
“At SOLV Energy, our mission is to make a positive difference wherever we go through projects that generate good energy for people and the planet. We are proud of the ongoing advancements we’ve made to enhance our ESG and safety policies, and are working closely with our business partners and stakeholders to further refine our ESG strategy and quantify our Good Energy impact. This is evidenced by a reduction in our total recordable incident rate month over month and the clearly defined goals in our 2023 Impact and ESG Progress Report,” SOLV Energy told The Progressive in a prepared statement.
American Securities declined to comment for this article.
Together, these reports reveal the inherent risks of private equity’s involvement in the global energy transition. Pension funds like the California Public Employees’ Retirement System and the New York City Retirement Systems have taken meaningful steps toward protecting workers and the planet, but the risks associated with their colossal allocations to private equity present an opportunity for civil society groups to ramp up public pressure on investors.
Some organizations have expanded the focus of their protests to call out private equity and its investors for contributing to the climate crisis as banks and publicly traded fossil fuel companies shed dirty assets, which are often gobbled up by these firms. In many cases, this results in a dangerous game of hot potato where the firms themselves opt to offload dirty assets after five years or so, rather than retire or decarbonize them.
As The Progressive reported last year, the disclosure of emissions by private investment firms is voluntary, resulting in incomplete and selective disclosures.
“We also asked the firms to provide emissions data,” Mendoza says. “None of them did so, but that’s the goal at the end of the day—for them to do that work themselves. But in the meantime, we’ll keep doing it.”
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Editor’s note: This article was updated after publication to include the full text of the statement from SOLV Energy at the request of the company’s public relations representative.