Financial Times: Cheering Shell’s Cambo exit may be premature

Using data and analysis from Private Equity Stakeholder Project research, a recent Financial Times editorial argued “Brown assets ought not to be private capital’s dirty secret: some transparency can be brought to bear, particularly on the larger private equity firms that are publicly listed. Markets regulators on both sides of the Atlantic need to be tougher on firms’ disclosure of their fossil-fuel holdings.”

FT editors noted the “unfortunate reality that there are many willing private-capital investors in fossil fuels. Oil majors under pressure to divest brown assets present a buying opportunity at knockdown prices, particularly if oil and gas prices continue to ricochet. Governments’ failure to curb oil and gas consumption means there are still years where healthy returns can be made.”

According to the FT, there were 21 private equity deals in the oil and gas sector in the first eight months of 2021. Citing a report by the Private Equity Stakeholder, FT editors observed that this “merely continues a trend witnessed over the past decade, where private equity has invested $1.1tn into the energy sector since 2010.”

FT editors argue that “This means there is an onus on the institutional investors — particularly public pension funds and sovereign wealth funds that espouse ESG values — that private capital relies on to effect change in lieu of shareholders.”

Private Equity Stakeholder Project, October 13, 2021: Private Equity Propels the Climate Crisis: The risks of a shadowy industry’s massive exposure to oil, gas and coal

The editorial notes that “pension funds’ investment in private equity, infrastructure and other alternative assets is expected to increase this year, and concludes “That kind of investment ought to have some serious strings attached.”