Ten of the largest private equity buyout firms had at least 80 percent of their energy portfolios in fossil fuels, as of October 2021. As public markets attempt to shed assets, private equity asset managers have repeatedly acquired them and operated these fossil fuel assets out of the public eye and beyond the oversight of financial regulators. The billions of dollars private equity firms have deployed to drill, frack, transport, store, refine fossil fuels, and generate energy, stand in stark contrast to what climate scientists and international policymakers have called upon to align our trajectory to the 1.5 degrees Celsius warming scenario.

The Carlyle Group ranked last among its peers, earning an F.

This report reveals the top eight private equity buyout firms invested in oil and gas and includes a set of demands to hold private equity accountable for the risks in their fossil fuel portfolios, the harmful impacts they have on the environment and frontline communities, and the need to execute a just energy transition. 

The scorecard assesses and ranks the fossil fuel portfolios and progress toward an energy transition of eight of the largest private equity firms. These eight firms oversee a combined $3.6 trillion in assets under management. The Carlyle Group ranked last among its peers, earning an F. In 2020, Carlyle-owned power plants emitted millions of tons of carbon dioxide, and the firm continues to demonstrate inadequate progress toward transitioning away from fossil fuels and reducing climate risks. Other bad actors include Warburg Pincus, KKR, Brookfield, Ares, Apollo, and Blackstone Group which all earned Ds. Private equity firm TPG earned a B, having a comparatively smaller portfolio of fossil fuels and having made some progress relative to its peers toward clean energy transition. 

F for Failing: Carlyle leads the pack of private equity polluters 

The Carlyle Group: The scorecard finds that The Carlyle Group and its subsidiary, NGP Energy Capital, which focuses almost exclusively on fossil fuel assets, are the worst fossil fuel backers within the sample of eight large private equity buyout firms. Carlyle is one of the world’s largest alternative asset managers with $376 billion in assets under management, and has investments in more fossil fuel companies than its peers. In 2020 alone, its downstream power plants emitted over 10.8 million metric tons of carbon dioxide into the atmosphere–second only to Blackstone, which emitted 18.1 million metric tons.

Despite Carlyle’s public commitment towards net zero by 2050 with a reference to its Task Force on Climate-Related Financial Disclosures (TCFD) report, Carlyle’s 2021 TCFD report does not include NGP in the scope of its reporting. This is an omission that should concern investors and the public because Carlyle’s recent 2022 second-quarter earnings report indicates that nearly 20 percent of the firm’s revenue and nearly 61 percent of the firm’s profit for the first half of the year came from NGP.

Carlyle’s 2022 second-quarter earnings report indicates that nearly 20 percent of the firm’s revenue and nearly 61 percent of the firm’s profit for the first half of the year came from NGP Energy Capital, which focuses almost exclusively on fossil fuel assets.

The D Bracket: A deep bench of private equity polluters 

Several of Carlyle’s peers are not far behind in terms of the climate devastation they cause. Blackstone, Warburg Pincus, Ares, KKR, and Brookfield and its subsidiary Oaktree, constitute a deep bench of private equity polluters. 

Demands for private equity

Together, Americans for Financial Reform Education Fund and the Private Equity Stakeholder Project, along with Greenpeace, Sierra Club, Food and Water Watch, Friends of the Earth, Natural Resources Defense Council, Action Center on Race and the Economy, Climate Finance Action, Stand.Earth, Public Citizen, and The Sunrise Project call on private equity firms to implement these demands and reduce climate and financial risks associated with their current and future investments.

    1. Immediately cease investments in fossil fuel expansion 
    2. Cease gas flaring and venting by 2025 
    3. Achieve a fossil-free energy portfolio by 2030 
    4. Retire fossil fuel energy assets by 2030
    1. Disclose all fossil fuel assets and financial estimates and assumptions regarding asset impairment 
    2. Disclose all direct and indirect emissions and climate-related community impacts 
    1. Disclose a portfolio-wide climate transition plan 
    2. Disclose role of voluntary carbon offsets immediately and cease their utilization by 2025 
    3. Disclose use of carbon removal, carbon utilization and storage, and related technologies 
    4. Disclose comprehensive analyses under various climate warming scenarios and decarbonization timelines 
    1. Establish robust due diligence, verification, and grievance redress mechanisms to ensure that all human rights and land rights are respected 
    2. Require all portfolio companies to adopt no-deforestation, no peat, and no exploitation (NDPE) policies 
    3. Develop a just transition program with impacted communities and workers 
    1. Disclose political spending and climate lobbying at asset manager, portfolio company, and trade association level 
    2. Provide transparency on alignment with global standards on responsible corporate climate lobbying 

Society cannot afford to let private markets continue to pollute under the shroud of darkness.

The institutional investors whose retirement capital is at risk, the communities harmed by fossil fuel extraction and impacted by climate change, and the public deserve transparency and a rapid transition away from dirty energy from the private equity industry. The policymakers and regulators who govern financial markets, as well as private equity’s investors, must require comprehensive disclosures and transition plans. 

This report was researched, written, and edited jointly by researchers at Private Equity Stakeholder Project and Americans for Financial Reform Education Fund. 

About Americans for Financial Reform Education Fund
Americans for Financial Reform Education Fund (AFREF) is a nonpartisan, nonprofit coalition of more than 200 civil rights, community-based, consumer, labor, business, investor, faith-based and civic groups, along with individual experts. Our mission is to fight to create a financial system that deconstructs systemic racism and inequality and promotes a just and sustainable economy. Follow AFREF at ourfinancialsecurity.org and on Twitter @RealBankReform.

About the Private Equity Stakeholder Project
The Private Equity Stakeholder Project (PESP) is a nonprofit organization with a mission to identify, engage, and connect stakeholders affected by private equity with the goal of engaging investors and empowering communities, working families, and others impacted by private equity investments. Follow PESP at pestakeholder.org and on Twitter @PEstakeholder.