大象传媒

A massive oil spill on the California coast caused by a broken pipeline is shining a harsh light on the fossil fuel industry, just as the world prepares for another climate summit in November.

In recent years, the fossil fuel divestment movement has focused on companies that are publicly traded, like Chevron or Royal Dutch Shell.   are calling for the , and institutions as disparate as and the in fossil fuel companies.

There鈥檚 one major oversight, however: private equity. Private equity firms, like the Carlyle Group, Brookfield Asset Management, and KKR, buy companies using high levels of debt and charge investors high fees to generate returns.   

Much evidence suggests that neither the general public nor government regulators fully understand the environmental and community impacts of private equity鈥檚 energy investments. The simple reason is that, unlike publicly traded fossil fuel companies, the fossil fuel investments are not subject to most public disclosure rules.

Environmental activists, , and have recently attempted to mandate greater climate risk investment disclosures. But the focus has largely been on public companies. Responding to this pressure, public companies are selling their fossil fuel assets, only to have them repeatedly firms鈥攖hereby shifting pipelines and other polluting assets to a shadowy industry that is less accountable and negating any progress on mitigating climate change.

Failing to hold private equity firms accountable exacerbates existing inequities.

From a new Private Equity Stakeholder Project report, documenting 10 of the , we learn that 80% of their holdings are in fossil fuels. Over the last decade, private equity firms have heavily invested in exacerbating our climate crisis. And even with predictions of , , and a growing list of climate-induced natural disasters, private equity firms continue banking on our extractive fossil fuels.

But all is not lost. Notably, public pension funds are among the largest investors in private equity. Although public pension fund trustees鈥攎any of whom are labor union members and state elected officials鈥攈ave largely missed opportunities to demand greater climate-related disclosure and the urgent decarbonization of private equity energy portfolios, there are opportunities and mechanisms by which the private equity industry can be held accountable for its role in the climate crisis. The public needs to accurately understand the public health and climate risks associated with private equity鈥檚 ever-expanding fossil fuel footprint. Without such an understanding, investors risk making decisions based on inaccurate and incomplete information鈥攁 serious fiduciary concern.

In a step toward addressing this problem, the University of Washington Harry Bridges Center for Labor Studies recently released a report reflecting on solutions discussed at a May 2021 forum . There, a consensus crystallized around practical solutions: Labor union trustees of pension funds and their allies must demand comprehensive climate risk disclosures from the private equity industry and urge transitions to carbon-free portfolios by 2030. The Private Equity Stakeholder Project, along with the Sierra Club and other climate organizations, have elaborated on these .

Pension fund trustees need to stop letting private equity off the hook and demand stronger and more comprehensive climate-related disclosures.

Failing to comprehensively measure that climate risk means that it is not being mitigated. If it is not being mitigated, we know it is further contributing to additional climate-related disasters and human rights violations.

For instance, findings in the UW report highlight the Wet鈥檚uwet鈥檈n First Nation鈥檚 ongoing resistance to private equity firm KKR鈥檚 Coastal GasLink (CGL) Pipeline through their territory in British Columbia, Canada. 

鈥淸The CGL] project threatens our water, our livelihoods as Wet鈥檚uwet鈥檈n people, and the future for our Wet鈥檚uwet鈥檈n children,鈥� said Wet鈥檚uwet鈥檈n leader Sleydo鈥� (Molly Wickham), during the forum. 鈥淲e will never stand down and will continue to resist this project and others like it, that do not gain consent from our people. It is a bad investment that will never see the returns that pensioners deserve.鈥�

As of late September 2021, members of the Wet鈥檚uwet鈥檈n First Nation and allies have to protect Wedzin Kwa, the sacred headwaters that nourish their community.

Extreme heat, rising seas, flooding, wildfires, drought and air pollution already have made the world more dangerous, particularly for those communities of racially and economically marginalized people. Failing to hold private equity firms accountable exacerbates existing inequities, further locks us all onto a path of no return for climate action, and puts the retirement futures for teachers, public safety officers, and other government sector workers at risk.

The last point is important, for private equity investment in fossil fuels has largely provided over the past decade. Over a similar period, by more than threefold. Yet total .

Pension fund trustees need to stop letting private equity off the hook and demand stronger and more comprehensive climate-related disclosures that go well beyond the private equity firms鈥� glossy sustainability reports鈥攁ll of which tout the firms鈥� commitments to a clean energy future, but fail to disclose the breadth of their fossil fuel assets or their climate risks. This is an evasive and misleading corporate practice often referred to as 鈥済reenwashing.鈥� A better understanding of the climate risks associated with private equity investments can help not only to protect the environment, but also to secure higher investment returns鈥攅nsuring a more sustainable future for retirees as well as the planet. 

As the world readies for the U.N. Climate Change Conference (COP 26) in November, there is warranted attention and pressure mounting on governments to make urgent changes. But ordinary individuals can also play a major role. Workers and retirees can demand greater climate-related disclosures from their pension funds as a condition for future investments in private equity. We all can provide comment at public pension fund meetings and demand that our elected representatives take bolder climate-related action. At the end of the day, we are all responsible for the future of the planet.