The University of Washington’s Harry Bridges Center for Labor Studies hosted a forum Wednesday, May 19, that explored the relationship between pension funds and other institutional investors, the climate crisis, and the impacts on communities and the environment. Pension fund trustees and representatives of dozens of investors with more than $10 trillion in assets combined participated in the forum. 

Moderated by Michael McCann, the University of Washington Gordon Hirabayashi Professor for the Advancement of Citizenship, panelists spoke of the growing urgency to interrogate the role private equity plays in exacerbating the climate crisis, often using pension fund capital. You can watch the forum here. 

Globally, private equity firms manage $7.4 trillion and that is expected to grow substantially in the next few years. Private equity firms have invested billions across the fossil fuel industry, including pipelines, LNG export terminals, coal plants, fracking and drilling.

Due to private equity firms’ lack of regulatory oversight and public disclosure, the climate impacts of these substantial fossil fuel holdings have not faced adequate scrutiny.

Treasurer of the British Columbia Government and Service Employees’ Union Paul Finch said at the forum, “What doesn't g­­et measured doesn't get managed. And we need to better understand what the risk is, and we need better measurements of investment risk. We need less blind trust of investment agents. We need to appoint more critical thinkers to these pension boards who are equipped and educated with the tools to be able to understand the risks that exist.”

Among the risks of fossil fuel investments are harms to communities of color and threats to Indigenous sovereignty. One example is private equity firm KKR’s Coastal Gaslink Pipeline, which is one of dozens of fossil fuel investments in KKR’s portfolio.    

KKR’s Coastal Gaslink Pipeline construction traverses unceded Wet’suwet’en Territory in British Columbia. Panelist Sleydo’ (Molly Wickham), Gidimt’en Checkpoint Wet’suwet’en spokesperson said, “Our resistance creates huge instability and risk to investors. We know that [KKR’s] Coastal Gas Link project has been delayed for at least one year and many seasons due to direct action and the requirement of added infrastructure throughout the pipeline route. We 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."

Even as the US has rejoined the Paris Agreement, the Biden Administration is advocating for greater investment in clean energy infrastructure, and as publicly traded companies begin to commit to net-zero emissions, private equity firms – such as the Blackstone Group, KKR & Co., and the Carlyle Group – continue to acquire fossil fuel assets, contributing to the climate disaster we are experiencing.

Private Equity Stakeholder Project Climate Director Alyssa Giachino told forum attendees, “There is a universe of economic actors outside of the public markets – like private equity -- that are finding buying opportunities in assets shed by publicly traded companies. Absent pressure and real accountability, private funds managers will continue to invest institutional investors’ capital in oil and gas despite the risks. The public needs real information to hold private equity accountable to the impacts they have already had on the environment and marginalized communities.”

In response to questions about the level of agency pension fund stakeholders have in successfully urging greater climate-safe investment, pension fund beneficiary and forum panelist Eileen Moran, member of the Environmental Justice Working Group of the Professional Staff Congress (PSC) at City University of New York (CUNY), AFT Local 2334 Member, said “Public pressure can and does influence elected officials.”

In recounting what it took to successfully urge both the New York City Retirement System and the New York State’s Common Retirement Fund to divest from fossil fuels, Moran discussed how “It took a broad coalition of environmental activists from 350.org, Food and Water Watch, People’s Climate Movement, community and faith groups, Indigenous groups, and a small number of unions including, AFSCME, CWA, the New York Nurses Union, DC 37 City Employees, and PSC-CUNY. It also took a wide array of tactics that included demonstrations, lobbying, letters to the editors, emails, and calls.” The coalition’s persistence through nearly a decade of struggle is what eventually secured significant fossil fuel divestment victories at the city and state level.

Mitch Vogel, a forum panelist, a pension fund beneficiary, and long-time pension fund trustee at the Illinois State Universities Retirement System (ILSURS) commented on the fund’s private equity investment in an old Goodyear plant in Southern Illinois, close to the Illinois River. Upon further investigation of the investment, the pension fund learned that the private equity firm was able to generate positive returns “by laying off all the union employees in the factory and hiring scab labor. They also dumped toxic waste into the river.” Vogel observed that “the private equity fund was messing up the environment and the pension fund was going to lose more money from the state because they were spending millions, if not billions of dollars to clean up the river.” In the end, the pension fund determined that they would not invest directly in non-renewable energy.

The forum not only highlighted the role of private equity in exacerbating the climate crisis, but also called out the industry’s efforts to market itself as a serious investor in a clean energy future, while it continues to invest billions in expanding the long-term fossil fuel infrastructure, often using pension fund, or labor’s capital. As highlighted by Giachino, just last month, KKR entered a $3.4 billion deal to buy Sempra Energy Infrastructure. It also entered a $4 billion deal with the Abu Dhabi National Oil Company’s pipelines in 2019. In 2017, the Blackstone group invested $1.6 billion in the controversial Rover oil pipeline. Carlyle also increased its stake in an oil refinery earlier this year.

The day before the forum, the International Energy Agency released a report boldly declaring that in order to meet emissions standards by 2050, any new oil, gas, or coal development should cease by the end of this year. Renewable energy sources are now cheaper than fossil fuels, and there is an increasing awareness of the harms of greenwashing and the devastating costs of global warming on marginalized communities and the environment. Pension fund exposure to fossil fuel assets while the industry itself faces growing regulatory pressure and structural decreases in demand are concerning for labor's retirement capital and remain detrimental to front-line communities and the environment.

The Bridges Center is pleased to have hosted this forum to advance the conversation about an important issue impacting us all.  And the Bridges Center loves feedback! Please complete this quick, and anonymous survey here. And if you want to learn more, check out the following list of resources about issues that were raised during the forum:

Wet’suwet’en Resistance Against The KKR-owned Coastal GasLink Pipeline

The Need For Climate-Safe Investments

ESG Investment And The Troubles with Greenwashing

Private Equity Performance and Accountability