The Guardian reported on the growth of pension fund investments in private equity over the past decade, making it more common that workers’ retirement savings go into funds that are buying up fossil fuel assets and squeezing them for profit in their final breaths.
The Guardian, November 15, 2021: How workers unknowingly fund the climate crisis with their pensions
Rock cited findings of the Private Equity Stakeholder Project’s (PESP) report on how private equity firms have “scooped up $1.1 trillion in fossil fuel assets since 2010, propping up the industry even as the divestment movement has pressured public companies and lenders to stop financing coal, oil and gas.”
Private Equity Stakeholder Project, October 2021: Private Equity Propels the Climate Crisis
PESP Climate Director and report co-author Alyssa Giachino explained to Rock, “Private equity is standing in the shadows, buying up assets that those other entities are trying to shed. Pension funds are uniquely positioned to influence the private equity industry, because they are a substantial source of capital.”
Rock highlighted how public pension funds have become the most important investors for private equity firms, leading to U.S. workers ultimately funding financial moves such as Amplify Energy’s oil pipeline, which last month had possibly California’s largest oil spill in decades.
PESP’s Climate Research Manager and report co-author Riddhi Mehta-Neugebauer told Rock, “While the world urgently needs to decarbonize, labor’s retirement capital is still propping up private equity’s fossil fuel industry at the expense of severe ecological devastation and marginalized communities who will be disproportionately impacted.”
“A lot of these pension fund trustees are teachers, government sector workers, or firefighters. There’s a big learning curve to go from being a government worker or schoolteacher to go into an investment space and suddenly be expected to understand private equity returns. So they tend to defer to the industry experts. If you just look at the returns, you might miss the fact that your fund is invested in a pipeline or export terminal that’s causing all sorts of community harm and environmental harm.”
U.S. public pension funds manage $4 trillion – about 20% of the country’s annual GDP – and in 2020, state owned institutions, like public pension funds and sovereign wealth funds have invested 22% of their capital in private equity.
The article also noted that private equity firms are subject to few disclosure requirements that would shed light on their fossil fuel investments, so requiring private equity firms to disclose their fossil fuel investments could help combat attempts at greenwashing.
As The Globe and Mail reported, citing PESP’s recent fossil fuels report, “the private equity players would rather you knew only about their renewable energy investments. They do have some – just not enough to allow them to slap a deep-green label on their entire portfolios.”
The Globe and Mail, November 5, 2021: Greenwashing is real as companies and funds ride the ESG express. The goal is to make it rare