Private Equity Firms Ploughing Billions Into Fossil Fuels, Analysis Reveals (theguardian.com) 63
Private equity firms are using US public sector workers' retirement savings to fund fossil fuel projects pumping more than a billion tonnes of greenhouse gas emissions into the atmosphere every year, according to an analysis. From a report: They have ploughed more than $1tn into the energy sector since 2010, often buying into old and new fossil fuel projects and, thanks to exemptions from many financial disclosures, operating them outside the public eye, the researchers say. In many cases they are mortgaging workers' futures by taking the money they have put away for old age and investing it in assets that risk serious damage to the climate, the report claims.
"Public sector workers' money, through national, state, and retirement pensions, provides much of the capital for private equity firms' energy investments, but there is limited disclosure to the pension fund managers that the deferred earnings of their beneficiaries have potential climate impacts," it says. Researchers at Americans for Financial Reform Education Fund, Global Energy Monitor and Private Equity Stakeholder Project assessed the holdings of 21 private equity firms, overseeing a combined $6tn in assets under management. Together, the analysis found that the 21 firms were funding projects responsible for releasing more than 1.17bn tons of CO2 equivalent (tCO2e) a year.
"Public sector workers' money, through national, state, and retirement pensions, provides much of the capital for private equity firms' energy investments, but there is limited disclosure to the pension fund managers that the deferred earnings of their beneficiaries have potential climate impacts," it says. Researchers at Americans for Financial Reform Education Fund, Global Energy Monitor and Private Equity Stakeholder Project assessed the holdings of 21 private equity firms, overseeing a combined $6tn in assets under management. Together, the analysis found that the 21 firms were funding projects responsible for releasing more than 1.17bn tons of CO2 equivalent (tCO2e) a year.
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Or to put it another way, their job is to make money, not to virtue signal. If they deviate from maximizing returns on my invested pension fund, they should be fired and replaced.
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The costs of CO2 induced climate change are in the hundreds of billions of dollars in increased weather-related damage and losses every year now, and the changes have barely even begun to take effect. The Holocene Climatic Optimum is the greatest goose that laid the greatest golden egg ever: civilization itself. And now it's very clear that we're endangering that goose's life, and some people ar
They Work (Score:2, Insightful)
There's a reason to invest in Things That Work.
Yeah "renewables" are cool.... but most should be called "unreliables."
They NEED the backups. The "renewable" backup is HYDRO.
NUCLEAR would be good, too - a decent breeder reactor setup would be great!
But failing that, it's still down to carbon to deal with the load.
It might not be what many want to hear, but plugging ears changes NOTHING.
I am NOT saying "petrochemicals/coal forever" but... recognize that even in a transition away from them, we'll need them fo
Re:They Work (Score:4, Informative)
Renewables get more reliable the more of them you have. The current gen offshore wind farms are starting to rival nuclear for reliability in Europe. Exceeding it in some cases, due to not having so many single points of failure.
But that's besides the point. Fossil fuels are causing problems, and we need to get off them as soon as possible. If they are looking like good investments, then clearly the system has failed to properly price them. Costs must be getting externalized.
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> Costs must be getting externalized
That would be the cost of artificial sequestration to extract the released carbon from the atmosphere. It's a huge expense that we're just ignoring.
When hydrocarbons are pulled out of the ground, they should be taxed not just to recover the carbon afterwards, but more on top of that to cover the removal of the last ~100 years of unfettered CO2 release.
Do that and you'll get the true market price on oil.
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Do that and you'll get the true market price on oil.
Given the world's disparities in wealth, its not clear raising the price will lower emissions very much. Bill Gates would still fly around in his private jet and heat and cool his mansions. While Gates is an extreme version, there are a lot of people who just aren't all that price conscious and they account for the lion's share of emissions. Gates will pay the extra cost to get the landscapers out to his house in the country. The emissions from the landscaper are really part of Gates footprint. The "market"
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there are a lot of people who just aren't all that price conscious and they account for the lion's share of emissions
It's people in developed countries that are responsible from most from air and car travel and a lot seem to complain when gasoline goes up to north of $3/gallon, so I would say that a lot of people in developed countries are quite price conscious.
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would say that a lot of people in developed countries are quite price conscious.
But they aren't the ones driving emissions. If Bill Gates is willing to pay the cost, the landscape contractor may complain about the cost of gas but he is still going to drive out to Bill Gates mansion. Even in the United States, there aren't all that many people who decide not to drive to work because of gas prices. We aren't going to get to carbon neutral if those are the only people changing their behavior.
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The impact of billionaires is negligible in the full scope of the problem. They're a convenient target, but they don't contribute that much because as much as they contribute on an individual basis, there aren't enough of them. And as for Bill Gates in particular, he says he is carbon negative [euronews.com] , by spending millions annually on direct air capture to more than offset his footprint.
there aren't all that many people who decide not to drive to work because of gas prices
Nonsense. High gas prices cause people to do a lot of things to reduce their consumption. They buy smaller, more efficient ca
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I am not talking about "billionaires". Bill Gates is an extreme example, but the distribution of emission footprint largely tracks wealth. And the distribution of the world's wealth is highly concentrated in 10% or less of the population. Do some people make choices based on gas prices? Yes, but they don't amount to much net reduction in emissions on a world scale.
As for Bill Gates being "carbon negative", he accomplishes that theoretical result by ignoring the emissions associated with his wealth. Instead
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Given the world's disparities in wealth, its not clear raising the price will lower emissions very much. Bill Gates would still fly around in his private jet and heat and cool his mansions.
True, but when you run the numbers, the number of billionaires is so small that it really doesn't make a large difference. The carbon dioxide being put into the atmosphere is being driven primarily by the large number of less-wealthy people, not the small number of ultra-rich.
"What about the ultra-rich!" is primarily whataboutism that people use to deflect having it pointed out that we are all responsible.
...The "market" is not going to get us to an emission free future, to the contrary it is going to do everything possible to prevent it.
The "market" doesn't solve all problems, but it would nevertheless help to make people pay the cost o
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When hydrocarbons are pulled out of the ground, they should be taxed not just to recover the carbon afterwards, but more on top of that to cover the removal of the last ~100 years of unfettered CO2 release.
Do that and you'll get the true market price on oil.
It will also get you quickly unelected and removed from office.
Dependent on Conditions (Score:2)
Renewables get more reliable the more of them you have. The current gen offshore wind farms are starting to rival nuclear for reliability in Europe. Exceeding it in some cases, due to not having so many single points of failure.
The mechanics may be highly reliable but the wind they need to generate power is much less so. Worse, it is correlated over large areas so when there are calm conditions a large area of farms will be affected. I think this is what the OP was refering to as "reliable".
The only effective solution to this is large battery storage which adds huge costs to renewable power. The one option that the OP does not mention is tidal power that has typically short and very predictable periods when it cannot generate
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Over a large area, like the North Sea, there is enough energy for the UK all the time. It never drops below what we consume. It's just a question of harvesting it.
Battery isn't the only form of storage either. They are building massive pumped storage facilities up in Scotland.
Re:They Work (Score:4, Informative)
> There's a reason to invest in Things That Work.
> Yeah "horseless carriages" are cool.... but most should be called "unreliables."
> They NEED the horses as a backup. The "horseless" backup is STEAM.
> It might not be what many want to hear, but plugging ears changes NOTHING.
> I am NOT saying "horsepower forever" but... recognize that even in a transition away from them, we'll need them for a while.
> I'd LOVE to be able to rely on non-equine sources... alas, we are NOT there yet - and not even close.
There's no need to be such a Luddite. Plenty of countries are going to 100% renewables. Batteries are so cheap and so EFFECTIVE that they can fully replace and improve on the performance of peaker plants, both in physical performance and financial.
It might not be what you want to hear, but plugging ears changes NOTHING.
The world is going renewable - the world HAS to go renewable. Because fossils are not renewable, they'll run out, and destroy us on their way out the door.
We are seeing the first effects in storms, droughts, wildfires, floods. No need to go down that road - renewables are cheap and abundant.
Batteries [Re:They Work] (Score:2)
...Batteries are so cheap and so EFFECTIVE that they can fully replace and improve on the performance of peaker plants, both in physical performance and financial.
Not yet, I'm afraid-- twelve to eighteen hours of battery storage, at the gigawatt level, is still outrageously expensive-- but battery technology is improving rapidly, and this is a reasonable projection for the next decade.
So: keep doing that research and that technology development, friends.
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...Batteries are so cheap and so EFFECTIVE that they can fully replace and improve on the performance of peaker plants, both in physical performance and financial.
Not yet, I'm afraid-- twelve to eighteen hours of battery storage, at the gigawatt level, is still outrageously expensive
Note that the comparison was with peaker plants, and you don't need 12-18 hours of storage for that, you only need a couple of hours -- often only a few minutes.
Getting to where batteries can cover the base loads overnight, etc., requires the 12-ish hours of storage and, yes, that's a lot tougher. Winter is another challenge, but that likely won't be solved so much by battery deployment as overprovisioning and diversification. One of the results lf that will be times of the year when we have enormous ov
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There's a reason to invest in Things That Work.
Things that work in the long term, right?
Right?
Selling out the future for shiny shiny today is unsustainable by definition.
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Re: They Work (Score:2)
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But we need quarterly profit! Poor things only have billions in assets.
Oil companies? Trillions.
Strange take (Score:4, Insightful)
The source of funding for the fossil fuel industry is not private equity. It's all of us. It is everybody that drives a gas/petrol vehicle, heats their home with natural gas, or consumes hydrocarbons in any of the ways that they power our economies. This article is a stupid attempt to cluck and shame entities that provide capital to business that are satisfying a demand that we all help to create.
PE is also one of the largest funders of utility-scale solar and wind projects in the developed and developing world.
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I rate it as... So what?
Public employee pension managers financial responsibility is only to the people who pay into those pensions, not whiny elitists. They invest money solely to fund the retirements of their members. If virtue signalers want it to change, I suggest they improve ROI on their preferred projects and quit trying to shame the money managers who are working to support retirees on fixed incomes.
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This kind of shaming is what you do when you know you are losing in the marketplace.
Ironically, there is a profit motive here also, driving the media coverage. Everything has to do with money. Anyone believing that virtue has anything to do with this is not worth listening to.
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So, I take it you don't live where Helene came through. Here's hoping the next one comes over your head.
And what option would someone with a 401k have to tell the fund managers not to invest in fossil fuels? The most I ever saw was how much risk.
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Re: Strange take (Score:2)
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You're mistaking funding for income. The source of income is the end user, but funding mostly comes from investors.
But funding is provided by investors in the anticipation of future income. They are not unrelated.
Another lame Guardian article from msmash (Score:5, Informative)
Pension managers invest pension funds so they can pay pensions in the future. That's their job, and the employees rely on them to do it well.
Private equity funds provide a vehicle for investing in things through private equity fund managers. That's their job, and the private equity investors rely on them to do it well.
When you buy into a private equity fund you know full well what type of investments they will be making, it's all disclosed up front. So this notion that pension fund managers are unaware of what they are buying is nonsense. The way this article is spun it's like the big bad private equity funds are somehow just grabbing pension money somehow and funneling it to their pet projects.
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"The report traces a trend of private equity firms swooping in as large oil and gas firms seek to shed older and dirtier assets and the bigger banks increasingly regard them as risky investments. Thanks to limited disclosure rules, regulatory loopholes and complex corporate structures, some of the dirtiest assets have come to be owned by relatively obscure investment outfits, the report says."
So the asset managers do not know what they are buying and these particular assets are especial
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From the article:
"The report traces a trend of private equity firms swooping in as large oil and gas firms seek to shed older and dirtier assets and the bigger banks increasingly regard them as risky investments. Thanks to limited disclosure rules, regulatory loopholes and complex corporate structures, some of the dirtiest assets have come to be owned by relatively obscure investment outfits, the report says."
So the asset managers do not know what they are buying and these particular assets are especially risky, so risky the banks are getting rid of them.
Your claim that "asset managers do not know what they are buying" is not at all supported by the provided quote.
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From the article:
"The report traces a trend of private equity firms swooping in as large oil and gas firms seek to shed older and dirtier assets and the bigger banks increasingly regard them as risky investments. Thanks to limited disclosure rules, regulatory loopholes and complex corporate structures, some of the dirtiest assets have come to be owned by relatively obscure investment outfits, the report says."
So the asset managers do not know what they are buying and these particular assets are especially risky, so risky the banks are getting rid of them.
Ah right, don't invest in fossil fuels, one day they will be stranded assets! I'll ignore the scary stories made up by people with an agenda. All this article is saying is that as a strategy this does not work.
As some organizations divest purely as a result of PR pressure, there are lots of others who are happy to pick up those profits in return. The profits are not going away, scary stories notwithstanding. I'm a customer, I heat my house and fuel my car. I'll be doing those things for a long tim
I'm a bastard (Score:3, Interesting)
I think we should be going full throttle on weaning humanity off of oil, and spending a lot of money on closed-cycle tech and artificial sequestration... but none of that is happening any time soon.
I have significant investments in the energy sector, majority petrochemical, because what is 'significant' to me is a drop of piss in the ocean compared to the market as a whole. I will never make a difference as an individual and I'm not going to ignore the likely returns.
But give me a politician who will legislate what needs to be done so that everyone is aligned to the same purpose and I not only won't complain about the lost investment potential, I'll vote for them. Enthusiastically.
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Oh, you know, laws about having to build safe facilities with minimal risk of leaks, storing the waste for longer than human civilization has lasted... Those kind of things.
Stop doing those and nuclear power is cheaper than dirt.
The Dick Cheney theory (Score:5, Insightful)
This is basically the Dick Cheney theory: he who controls that last 50 million barrels of oil will win control of as much of the Earth as they want. Which includes not really being concerned about the condition of the parts of the Earth they don't want, and not understanding the interconnectedness of all people and regions of the planet.
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50 million barrels? That's about 4 days of U.S. production. Even in a post-apocalyptic world, that's not enough for world domination.
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Yeah, but 1,000 survivors can't really "dominate" the world.
Re: The Dick Cheney theory (Score:1)
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President Nixon started it! (Score:1)
This is more about the value of the US dollar as a global reserve currency today than it is about the environment or climate change; petrodollar.
The US dollar is being devalued and decoupling it from oil at this juncture would be suicide. When your ship is sinking you do not worry about the impact the carpet fibers will have on the marine life.
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This is basically the Dick Cheney theory: he who controls that last 50 million barrels of oil will win control of as much of the Earth as they want.
There will never be a "last 50 million barrels". We'll stop using oil long before we get to that point.
The hard, ugly truth is (Score:2)
Every single country uses vast quantities of fermented dinosaur. Countries that can't mine it themselves are holding out fistfulls of cash in order to buy it from some other country. Maybe that will change. Next century. But not anytime soon.
If the civilized world steps back from hydrocarbon extraction and sales, less civilized countries will step in and fill the gap coughRUSSIAcough. The same amount of carbon will get
Point yer pitchforks thataway? (Score:1)
Seems like the play here is to rile up pitchfork yielding enviro mongers and point them at the funding source for evil sources of energy?
juvenile.
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Yes it's a bunch of manipulative editorializing by the Guardian. Par for the course.
They speak of private investments as if it's a nefarious thing, dastardly fund managers hiding from public scrutiny - private investing is by definition private. Their favoured Progressive Causes are private too.
they'll burn it all, be prepared to cope with it (Score:1)
That sounds like Eloi talk to me.
not in the US (Score:2)
In the US, they are plowing the funds.
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I thought that a plough was towed behind a tractor to break up ground on a farm for planting crops.
And a plow was a blade on the front of a truck to clear away snow.
But then I wasn't born in the USA.
Rearranging deck chairs on the Titanic (Score:2)
Ethical investing likely has very little impact on outcomes. If the pension funds choose to invest elsewhere, the oil wells will still be drilled because there is money to be made. Someone else will take advantage of that profitable investment opportunity.
The real message here is that these folks don't believe we are going to wean ourselves off fossil fuels. At least not to the extent it will make their investments unprofitable. We can hope they are wrong, But I would give more credence to the investment
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Ethical investing likely has very little impact on outcomes. If the pension funds choose to invest elsewhere, the oil wells will still be drilled because there is money to be made. Someone else will take advantage of that profitable investment opportunity.
Got any evidence to back that up? From a quick search, it looks more like there's problems with implementation than any fundamental issues, e.g. https://www.ncbi.nlm.nih.gov/p... [nih.gov]
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While pension fund climate action is growing , the ambition of their strategies is not aligned with a rapid fossil fuel phaseout
Why would it be? That is not actually their reason for existing.
If pension funds are to significantly contribute to phasing out fossil fuels, redefining pension fund responsibilities and the traditional shareholder role will likely be required.
LOL. We need them to cease concerning themselves with pensions and become instruments of our environmental agenda instead.
Public policy... (Score:2)
It's not like large investors can't stipulate which particular types of investment they don't want to make
Simple solution (Score:2)
Private equity firms are using US public sector workers' retirement savings
We need a smaller public sector. A smaller public sector will generate less savings for these pension funds to invest. Next, we make everyone a contractor, responsible for their own retirement. This will allow them to direct their savings toward investments that they believe have the highest value. Including environmental values if they so desire.
This is what you get when you socialize the allocation of capital problem. Bad decision making due to a huge, monolithic pool of savings being a target for Big In