American private equity A new investigation shows that fossil fuels are driving greenhouse gas emissions and that tycoons profit from the global crisis.
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, according to an investigation by the corporate accountability nonprofits LittleSis and the Private Equity Stakeholder Project (Pesp).
Private equity is an opaque form for financing away from the public markets. Funds and investors buy and restructure companies, including startups, troubled businesses, real estate, and real-estate. Globally, the industry manages over $7 trillion for wealthy investors like mutuals, hedge funds and pensions. They invest in every sector, from healthcare and retail to prisons and weapons.
Some of this money goes to fossil fuel projects, which release greenhouse gases that cause global warming. Increased ocean and atmospheric temperatures directly correlate with the increase in severe weather events like hurricanes, extreme temperatures, drought, and other extremes.
Private equity firms are exempted from most financial disclosure rules unlike banks and other publicly traded companies. This makes it very difficult to track their assets. This means that people such as firefighters and teachers who have their pension funds invested in private equity funds don’t know if they are financing solar farms, oil wells, or coal plants.
The Private Equity’s Dirty Dozen report, Exclusively shared with the Guardian, provides a snapshot of the industry’s involvement in some of the country’s most controversial fossil fuel investments, as well as the deep political and cultural ties of its wealthy executives. The investigation revealed:
- The Carlyle Group, one of the world’s largest private equity firms, owns dozens of oil and gas companies including a stake in NGP Energy Capital, which boasts its own major portfolio mostly focused on fracking and drilling in states like Texas, Wyoming, and Colorado. Carlyle, which recently announced a goal to achieve net zero emissions by 2020,, also partners with Hilcorp Energy—a major methane emitter with a track record of offshore spills in Alaska and the Gulf of Mexico—on at least $4 billion in equity and debt deals. (Methane has more than a dozen uses) 25 times more potent than carbon dioxide at trapping heat in the atmosphere, and accounts for about a quarter of today’s global heating.)
The Carlyle Group’s Network of Influence
- Kohlberg Kravis Roberts & Co (KKR)Canada’s Coastal Gaslink pipeline is owned by a majority of the company. This 400-mile, multibillion-dollar infrastructure project runs through unceded Indigenous territories. It will transport fracked natural gas from a Pacific coast port for Asia to a Pacific coast port. Police have deployed to evict protests and blockades organized by the hereditary chiefs of the Wet’suwet’en Nation. Co-founder Henry Kravis is a major Republican donor, donating $1 million to Trump’s 2017 inauguration fund.
KKR’s Network of Influence
- Daniel Revers is the managing partner & founder of ArcLight Capital Partners, a top energy-focused private equity firm, who accompanied Trump to China in 2017—reportedly to help recruit investors for an environmentally disastrous refinery in the US Virgin Islands. The EPA used its emergency powers to shut down Limetree Bay’s oil refinery. Multiple toxic leaks had caused school closures and adverse impacts on the health of majority black communities. The DoJ filed a complaint alleging that the refinery posed an immediate threat to public health or the environment. Limetree then filed for bankruptcy.
ArcLight Capital’s Network of Influence
- Richard Kayne is a major Republican donor and co-founder of Kayne Anderson Capital Advisors, the America’s largest investor in energy pipelines. Kayne held a stake in the fifth largest oil pipeline developer in the world, the Plains All American Pipeline, when it was fined $60 million for spilling 140,000 gallons of crude oil into the Pacific and the California coast in 2015—the state’s worst oil leak in 25 years. The company sold its stock in 2021, but Kayne still holds a seat on this board.
These findings have reaffirmed the need for greater transparency in the booming industry of private equity, so that communities who are most affected by toxic emissions and extreme weather can track who is behind the misery.
“By plowing money into dirty coal plants, offshore drilling and deforestation, private equity threatens to undermine our hard work to tackle the climate crisis and advance environmental justice,” said Elizabeth Warren, former presidential candidate and member of the Senate committee on banking. “It’s just another page from private equity’s standard playbook: boost short-term profits at the expense of the long-term wellbeing of communities.”
Alyssa Giachino, Pesp’s climate director 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.”
A KKR spokesperson said the company “wholeheartedly disagreed” with the report’s assertions. “Not only do we believe in—and our actions support—the need for a sustainable energy transition, we also believe in the value and importance of transparency, as evidenced by an extensive library of public disclosures including our Climate Action Report and Sustainability Accounting Standards Board Report [among others].”
Private equity firms have produced a select group of super-rich power brokers with strong ties in politics and the arts.
Recently, banks have come under increasing criticism for their involvement in financing fossil fuel projects. However, the secrecy surrounding private capital has kept the industry out of the same scrutiny. But, 2020 will see investments by state-owned institutions like the public pension system and sovereign wealth fund. 22 percent of the trillions in their portfolios in private equity where—unlike the stock markets—only the wealthy and institutional investors have direct access to this capital.
Although it is difficult to track the impact and nature of these investments, PitchBook, a financial data analyst, estimates that there has been at most $1.1 trillion in private equity deals worldwide since 2010.
It’s no secret that the oil and gas industry spends big on politics, contributing more than $700 million through individual, PAC and outside donations since 2000, Open Secrets. More than 80 per cent of campaign contributions have gone to Republican coffers.
However, the financial aspects of this are not. SectorThe largest source of campaign donations to federal candidates and parties is by far Schwarzman. Stephen Schwarzman, chief executive and founder of Blackstone Group and the world’s 34th richest man according to Forbes, is a major Republican donor who has personally contributed to Donald Trump, Mitch McConnell, and former Georgia senator Kelly Loeffler—who supported overturning the 2020 presidential result. (Schwarzman has recognized Biden’s victory and condemned the January 6 insurrection.)
Blackstone, the world’s biggest private equity firm which manages$731 billion in assets, co-owns (with ArcLight) one of America’s dirtiest coal plants, the General James Gavin power station in Ohio. Blackstone also has a significant stake in the owner of the Dakota Access pipeline—the oil infrastructure project which triggered the Standing Rock protest camp where Indigenous water protectors were brutalized by law enforcement.
A spokesperson said: “Virtually none of the capital Blackstone invested in the last three years was in fossil fuel exploration and production. We have simultaneously invested over $15 billion in projects that we believe are consistent with the energy transition.” The company does not make corporate donations.
The fossil fuel investors have also helped Democratic candidates. Adebayo Ogunlesi, founder and managing partner of Global Infrastructure Partners (GIP), has donated to Barack Obama and Joe Manchin, a coal-friendly West Virginia senator who has blocked Biden’s climate spending bill, Build Back Better.
Ogunlesi oversees $79 billion in assets, with over half of the company’s portfolio in energy investments, according to market data. GIP is part of a consortium which in 2020 bought a 49 percent stake in the Abu Dhabi National Oil Company’s infrastructure, in a deal worth $10 billion that gives them lease rights to gas pipelines for the next 20 years.
Ogunlesi, who is the senior director of Goldman Sachs and has sat on various boards at Harvard University, served alongside Blackstone’s Schwarzman on Trump’s business advisory council, which was abandoned after the former president described white supremacist protesters in Charlottesville as “very fine people”.
The report details the symbiotic relationships between ultra-rich private equity executives and the rest of America’s elite such as Carlyle’s co-founder David Rubenstein, whose net worth is estimated at $4.6 billion, and who sits on the board of several influential think tanks and arts.
“It’s a big problem that ultra-wealthy private equity executives are able to use their fortunes to enmesh themselves on the boards of the most prestigious universities, cultural institutions and think tanks,” said Derek Seidman, researcher with LittleSis and report co-author. “This helps them burnish their public reputations in ways that obfuscate the fact that they are, in reality, some of the world’s biggest oil barons.”
ArcLight, GIP and Carlyle did not respond to our requests for comment.