Emissions declarations by equity firm Carlyle under question

Sep 25, 2022, 7:00 PM | Updated: Sep 26, 2022, 10:27 am
Pages from a Carlyle Group 2021 report on its financial risk from greenhouse gas emissions are phot...

Pages from a Carlyle Group 2021 report on its financial risk from greenhouse gas emissions are photographed Tuesday, Sept. 20, 2022. A “note on scope” halfway through the document said that due to a “different business model,” Carlyle’s largest oil and gas investment, NGP, was not included. As the climate crisis worsens and emissions get more scrutiny, what major companies decide to disclose is increasingly important. (AP Photo/Jon Elswick)

(AP Photo/Jon Elswick)

LONDON (AP) — At the start of 2022, the Carlyle Group, one of the world’s leading private equity firms, published a report on its financial risk from greenhouse gas emissions. Yet something was not in the report.

Carlyle’s largest oil and gas investment, NGP, was not included. A “note on scope” halfway through the document said this was due to a “different business model.”

As the climate crisis worsens and emissions get more scrutiny, what major companies decide to disclose is increasingly important. Carlyle, which has 26 offices around the world, almost 2,000 staff and $376 billion in assets, presents itself as different from the pack, claiming to “drive positive change,” with activities “grounded in driving real emissions reductions.”

Carlyle said this was its first such portfolio-level analysis. The company emphasizes its climate credentials, and an introductory note by then CEO Kewsong Lee stressed the importance of transparency and disclosure.

“They are telling one story to investors and doing something else that gets results,” said Dr. Sean Field, of the Centre for Energy Ethics at University of St. Andrews in Scotland.

NGP is also a private equity firm, originally called Natural Gas Partners, with $10.4 billion under management at the close of 2021. Carlyle’s own filings show NGP is probably its most carbon-producing investment.

“Carlyle’s future investments in carbon-based energy are expected to be made primarily through NGP in the United States and Carlyle International Energy Partners outside the United States,” Carlyle said in its annual report last year. NGP’s funds are more than four times bigger than Carlyle International Energy Partners.

NGP makes up some 8% of Carlyle total earnings on average over the last five years, the company said in an email. But due to high oil and gas prices since the Ukraine war, in the first half of 2022 NGP made $512 million for Carlyle – more than 20% of its total revenues and 49% of its profit. If energy prices remain high, NGP is on track to earn $1 billion for Carlyle this year. NGP is currently trying to raise a $600 million fund for new exploration in oil and gas.

Jorge Guira, a professor in climate law and finance at the University of Reading, England, said it was telling that the Carlyle’s mention of NGP appeared in a footnote. Although Carlyle was undoubtedly legally compliant, he said, its approach raises “challenging questions.”

That’s because U.S. companies are required to show good corporate citizenship, said Guira, who is also a member of the Florida Bar and a practicing lawyer for 30 years. “This reporting and exercise of duties may not meet everyone’s definition of that standard,” he said.

Carlyle, headquartered in Washington, D.C., said in a written response that it left nothing material out of its report, and its passive relationship with NGP meant it was too distant to merit inclusion. “Carlyle does not control NGP. Carlyle does not manage NGP. Carlyle does not operate NGP’s business. Carlyle does not have representation on NGP’s board,” it said in a letter.

The company filing was made in accordance with 2017 guidelines issued by the Task Force on Climate-Related Financial Disclosures, prompted by G20 ministers and central bank governors. The guidelines are voluntary and help companies worldwide disclose the financial risks climate change poses to them, letting climate-concerned investors decide whether to own shares.

Under the TCFD guidelines, companies are told to disclose climate pollution by firms in which they invest, “if appropriate.” Carlyle’s report said its emissions for its largest majority-owned funds in 2021 were the equivalent of 79 metric tons of carbon dioxide per million dollars of revenue.

In light of this case, Guira called for reform of the TCFD to eliminate any wiggle room in disclosures.

The Private Equity Stakeholder Project is a non-profit that tracks the environmental impact of private equity firms. Executive director Jim Baker said Carlyle should be “honest and transparent” with both the public and investors about its “full emissions and role in contributing to the climate crisis.”

Founded in 1988, NGP owns portions of more than a dozen energy companies. These include Texas-based Blackbeard Operating, which works in the Permian Basin and elsewhere in the U.S. In 2021, Blackbeard emitted almost twice as much methane as fossil fuel giant Chevron’s exploration and production business, according to research based on U.S. government data by the Clean Air Task Force. Over a 20-year period, methane warms the planet 82 times more than carbon dioxide. Blackbeard did not respond to an emailed request for a comment.

Another NGP investment, Crimson Midstream, a holding company, is linked to a major oil spill. Crimson Pipeline, which was registered to the same address in Denver and shared a senior executive, spilled some 44,000 gallons of oil from a pipeline in Ventura County, California, in 2016 following a faulty repair. It took months to clean up and ended in a $1.6 million settlement in 2020.

NGP, which invested in Crimson in 2012 and then sold it last year, had no comment on this incident. It seeks to be a “performance leader” among responsible energy owners, the NGP spokesperson said. “We work closely with our portfolio companies to monitor environmental performance (and) set ambitious goals for performance improvement.” Crimson declined to comment.

Field, of St. Andrews, said rising fossil fuel prices have led to a bonanza for firms like Carlyle.

“The private equity people I talk to are making money hand over fist in a way they weren’t a couple of years ago,” he said. “Of course they want to be in this space.”

Carlyle is not the only company to come under fire over emissions disclosure in recent years, and by some measures could be considered a leader in its field. The non-profit CERES, which argues for a more sustainable economy, found in 2021 that only two private equity firms of those it interviewed had released standalone TCFD reports, Carlyle one of them.

Private equity is often opaque. Carlyle is listed on the NASDAQ stock exchange. But most private equity firms are not publicly traded, and so don’t have to publish much data. One contributor to the CERES report opined that measuring the combined carbon footprint of private equity firms was “nearly impossible” due to poor data. However in this case, Carlyle confirmed to the AP via email that it does have an emissions report from NGP. It would not share it, saying it is not free to do so.

Field called Carlyle a “symbolic leader” in its field on climate issues. The company was technically fulfilling its responsibilities but displaying “slippery ethics,” he said, because while company officials talked about reducing emissions, the profitability of its fossil fuel investments was the bottom line.

Giant fund manager BlackRock made waves in the climate and finance world in early 2020 when its highly influential CEO, Larry Fink, in his annual letter, focused on climate change and said sustainability would be at the center of its investments from then on. The next year the company was criticized for failing to say what proportion of its investments would be carbon neutral by 2050. It later clarified its “ambition” was for all assets under management to be at net zero by 2050. Some have suggested asset managers can game the system, choosing which investments they include in climate targets.

Carlyle said that apart from companies it directly owns, it only publishes carbon emissions for those where it has the right to make operational decisions. The relationship with NGP, in contrast, is indirect, through an investment vehicle, a Carlyle spokesperson said. The spokesperson asked not to be named, in line with company policy.

“These are longstanding commercial arrangements negotiated with NGP,” the spokesperson said.

Carlyle publishes no emissions data for any individual companies so it is “illogical to suggest that we are leaving out NGP’s emissions,” the spokesperson said.

However, in 2020, Carlyle did publish emissions data for at least two of its companies, Accolade Wines and Neptune Energy. It owns 100% of Accolade Wines.

The spokesperson clarified that when its companies have published their own greenhouse gas footprints, Carlyle may highlight this.

The company also said that before the current high energy prices, NGP made up only 5-6% of its business. On climate change, the spokesperson said Carlyle was one of the first major private equity firms to commit to net zero emissions by 2050, and is a member of various environmental initiatives.

It if were to simply divest from all energy companies, that would make its decarbonization “someone else’s problem,” the spokesperson argued.

But for Baker, at the Private Equity Stakeholder Project, that’s not good enough – because, he says, compared to its peers, fossil fuels make up a far higher share of Carlyle’s profits. At the beginning of 2022, Carlyle had around $24 billion invested in fossil fuels, according to the Private Equity Stakeholder Project. The organization found Carlyle and NGP combined controlled scores of fossil fuel companies, more than any other large private equity firm. Carlyle told the AP it controlled management and policies of six hydrocarbon companies directly.

“Given their massive fossil fuel exposure, private equity firms like Carlyle have an urgent responsibility to address the significant role they play in propelling the climate crisis,” said Baker.

___

Associated Press climate and environmental coverage receives support from several private foundations. See more about AP’s climate initiative here. The AP is solely responsible for all content.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

murders...
Associated Press

Appeals court upholds most Eyman campaign finance violations

A Washington state Court of Appeals on Tuesday upheld most of the campaign finance violations that longtime anti-tax initiative promoter Tim Eyman was found liable for last year.
8 hours ago
A Washington State Department of Agriculture worker displays an Asian giant hornet taken from a nes...
Associated Press

No northern giant hornets found in 2022 in Washington state

Citizen trapping of northern giant hornets in northwest Washington ended Nov. 30 without any confirmed sightings of the hornets this year, state officials said Tuesday.
8 hours ago
This illustration provided by researchers depicts Kap Kobenhavn, Greenland, two million years ago, ...
Associated Press

Oldest DNA reveals life in Greenland 2 million years ago

NEW YORK (AP) — Scientists discovered the oldest known DNA and used it to reveal what life was like 2 million years ago in the northern tip of Greenland. Today, it’s a barren Arctic desert, but back then it was a lush landscape of trees and vegetation with an array of animals, even the now […]
1 day ago
President Joe Biden speaks about his economic agenda after touring the building site for a new comp...
Associated Press

US to boost natural gas exports to UK in energy partnership

WASHINGTON (AP) — The United States will increase exports of liquefied natural gas to Britain under a new agreement calling for the two countries to work together to boost energy security and drive down prices following Russia’s invasion of Ukraine. President Joe Biden and British Prime Minister Rishi Sunak announced the agreement Wednesday as part […]
1 day ago
Law enforcement at Hudson Road and Earl Street in St. Paul, Minn., after St. Paul police shot a per...
Associated Press

Community seeks bodycam video in St. Paul police shooting

ST. PAUL, Minn. (AP) — Community members are calling for the quick release of body camera video after a Minnesota officer shot and killed a man, who police say had a gun. Family members have identified the man as 24-year-old Howard Johnson. He was shot by a St. Paul police officer on Monday, police said. […]
1 day ago
FILE - Boys play soccer among trash that litters the sand of Yarakh Beach in Dakar, Senegal, Nov. 8...
Associated Press

Africa forum hails ‘circular economy’ solutions for climate

MOMBASA, Kenya (AP) — Reducing waste while boosting recycling and reuse, known as the ‘circular economy,’ will be vital for halting the loss of nature by meeting growing demand with fewer resources and will make communities more resilient to climate change by encouraging more sustainable practices on the African continent, organizers of the World Circular […]
1 day ago

Sponsored Articles

Comcast Ready for Business Fund...
Ilona Lohrey | President and CEO, GSBA

GSBA is closing the disparity gap with Ready for Business Fund

GSBA, Comcast, and other partners are working to address disparities in access to financial resources with the Ready for Business fund.
SHIBA WA...

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Lake Washington Windows...

Choosing Best Windows for Your Home

Lake Washington Windows and Doors is a local window dealer offering the exclusive Leak Armor installation.
Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Emissions declarations by equity firm Carlyle under question