Private Equity Fossil Asset Research and Engagement
In recent years, the private equity industry has grown dramatically. At the same time, private equity firms have been investing heavily in the energy sector – at least USD 1.1tr since 2010, with most of these investments flowing into fossil fuel projects. Private equity investors are buying up fossil fuel assets that publicly traded energy companies have begun to sell off to meet the calls from investors and campaigners to align their businesses with climate objectives or because of the bad economics associated with the assets.
Instead of closing coal-fired power plants or oil and gas extraction projects, private equity firms are buying up these fossil assets and keeping them alive. Furthermore, the private equity industry is often focusing on aggressive cost-cutting, which may reduce spending on environmental compliance or pollution control, which in turn might exacerbate the risk of fossil assets.
The Private Equity Stakeholder Project (PESP) and a coalition of NGOs have set out to shine a light on the private equity sector and the investors channeling money through private equity, to address the financial support they provide to toxic fossil fuel assets.
Compared to publicly listed fossil fuel companies, private equity investments in fossil assets have largely escaped scrutiny. The project led by PESP aims to track and draw attention to private equity firm investments in fossil assets by identifying who owns what, by investigating the financial vulnerabilities of the fossil fuel projects as well as identifying the institutional investors that back private equity investments in fossil assets. PESP and the collaborating NGOs will engage with the investors and the private fund managers to get them to shift their portfolios away from fossil fuels.