Lawmakers in Washington, D.C. introduced the"Stop Wall Street Looting Act" in 2019. It would make private-equity firms responsible for debts and retirement pension obligations of companies they purchase, while making their profits contingent on the success of the entities they control.
Typically, limited partners sign on with a private equity fund manager without knowing what that person plans to buy. Once those investments are made, they don't have any say in how they're managed or when they're sold. "In private equity, you're investing in what we call a blind pool — you're committing to this fund, but you don't know what you're buying because the private equity firm doesn't know what they're going to buy yet," said Hilary Wiek, lead analyst for fund strategies and performance at PitchBook."They need to raise their fund first, and then they go out and find investments.
But with deadly heat waves, wildfires and floods this year killing people by the thousands, defunding fossil fuels can't come soon enough, critics say. Many entities currently funding fossil fuels have promised to stop by 2050, a generation in the future. But a typical private-equity fund owns a company for just three to five years before selling it.
"Private equity firms have a very short timeframe," said Mehta-Neugebauer of the PESP."If they're just holding on to these companies for three to five years, then perhaps even by the end of this decade they could achieve fossil-free portfolios."
Not so fast! Renewables are barely 15% of energy and 5% EV cars.