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Billions of Danish kroner from Danes’ pension savings are co-financing hundreds of fossil fuel power plants, without this being reflected in the pension funds’ carbon statements in their climate accounts.
Danwatch can document Danish pension investments of DKK 4.7 billion in eight private equity funds that own or finance at least 426 active oil, gas and coal power plants.
The power plants have so far been hidden from Danish pension savers and escape the pension sector’s CO2 statements.
The power plants can be traced back to 13 Danish pension funds via their investments in various financial products offered by private equity funds – shares, bonds, funds and joint venture companies that fully or partially control the power plants.
When a private equity fund buys an energy company or power plant, information about CO2 emissions disappears because many private equity funds do not report emissions from investments to shareholders, including Danish pension funds.
In 2021, the private equity fund KKR made major share purchases in the oil companies Crescent Energy and Sempra. Through the investments, KKR controls and owns both Crescent Energy and Sempra as the largest shareholder.
The two energy companies emit more than 50 million tonnes of CO2 annually. That’s more than Denmark’s total emissions of around 44 million tonnes in 2022.
Emissions from Crescent Energy and Sempra are not included in the private equity funds’ climate accounts, which exempt investments from carbon accounting – the so-called scope 3 category 15 emissions according to the GHG protocol standard.
Another example is emissions from the coal-fired Gavin Power Plant in Ohio, USA. In 2016, American Electric Power sold the power plant to the American private equity fund Blackstone, which also does not report emissions from its investments. Thus, the emissions disappear from the reports.
Gavin Power Plant is also involved in a local environmental dispute with the US Environmental Protection Agency (EPA), which has rejected an application from Gavin Power Plant to continue discharging polluting coal ash into a nearby water reservoir.
According to Andreas Rasche, Professor at the CBS’ Centre for Sustainability, pension funds should disclose the “hidden” emissions from all power plant owners in their climate accounts. This would give a more accurate picture of how many greenhouse gases Danish pension savers are actually helping to emit through their investments.
“Danish pension funds should at least try to estimate these emissions, even if data is not available. However, when you know the exact assets, it is often possible to estimate emissions. It’s not perfect, but it’s better than nothing,” says Andreas Rasche.
The power plants are financed through Danish pension funds’ investments in eight of the world’s largest private equity funds: KKR, Carlyle, Blackstone, BlackRock, Ares Management, Macquarie, Apollo Global and Brookfield.
Many private equity funds buy shares in fossil fuel power plants that oil and gas companies do not want to continue operating for various reasons. Some are run-down, inefficient or in serious environmental trouble. Others are divested for strategic or financial reasons.
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They escape pension funds’ climate accounts
Here are four examples of fossil fuel power plants that Danish pension funds, through investments in private equity funds, are connected to but do not include in their climate accounts.
Private equity funds control the power plants for a number of years with the aim of making a profit on a later resale. It is the core business of a private equity fund to do just that.
But the private equity funds are running from the climate bill by failing to inform their shareholders and partners – including Danish pension funds – about the gigantic emissions from the power plants.
Danwatch has also presented the mapping of the hidden CO2 emissions to Thomas Meinert Larsen, campaign coordinator for responsible investments at The Danish Climate Movement.
“Danwatch’s mapping of private equity funds’ ownership of fossil fuel power plants reveals an extent that should give food for thought for all pension funds that work with private equity funds and want to be serious about climate solutions,” he says.
Several pension funds state that they try to estimate emissions via external data providers. Danwatch is familiar with this data.
Pension funds recognise the problem
The survey shows very precisely that Danish pension funds have equity and bond investments of at least DKK 4.7 billion in eight large American private equity funds that control the power plants through various financial structures.
Industriens Pension, which is jointly owned by the Confederation of Danish Industry and the country’s largest trade union 3F, recognises that information on emissions from the pension fund’s investments is inadequate.
“Data is still under development and we therefore have a strong focus in our active ownership on companies’ reporting of emissions,” says Ann-Louise Winther, Head of Responsible Investment at Industriens Pension, after Danwatch presented her with the hidden emissions from the industry portfolio.
Industriens Pension’s 440,000 members own shareholdings worth almost DKK 500 million in private equity funds KKR, Blackstone, Brookfield, BlackRock, Macquarie Group, Apollo Group and Ares Management.
In addition, there may be investments in the private equity funds’ unlisted funds and other management mandates.
The Pension Fund Architects Designers (PAD) is surprised by the many hidden emissions and will now take up the matter with Sampension, which manages PAD’s pension money.
“PAD has outsourced its investments to Sampension, and we are strongly committed to avoiding greenwashing of the portfolio’s carbon footprint. Therefore, I will of course address the issue of uncertainty in the data basis with Sampension A/S’ Board of Directors,” says Mads Gudmand-Høyer.
Sampension states that they regularly request climate data from private equity funds in which they are involved.
“You can discuss whether managers should include emissions in their scope 3 statement, not because they finance or own the emissions, but because the statement may have informative value in relation to the overall assessment of the manager’s climate profile,” says Jacob Ehlerth Jørgensen, Head of ESG at Sampension.
In addition to equity investments in several private equity funds, Sampension has invested DKK 9 billion in private equity funds managed by KKR, Blackstone, Blackrock, Carlyle Group, Ares Management, Macquarie, Apollo Management and Brookfield.
PensionDanmark rejects criticism
Unlike PAD, Sampension and Industriens Pension, PensionDanmark denies that their climate accounts are misleading.
“We have reviewed the enquiry from Danwatch and we see nothing to suggest that “fossil assets systematically go under the radar”, says Jan Kæraa Rasmussen, Head of ESG and Sustainability at PensionDanmark.
Andreas Rasche encourages all Danish pension funds to demand more information from the private equity funds they invest in or work with.
“The inclusion of funded emissions (emissions related to investments and financial services, ed.) is crucial to get a complete picture of a company’s carbon footprint. Therefore, Danish pension funds should push the private equity funds they invest in to report more comprehensively,” says Andreas Rasche.
According to Danwatch’s own calculations, the many fossil fuel power plants owned by private equity funds emit many millions of tonnes of greenhouse gases annually, equivalent to more than 100 times Denmark’s annual CO2 emissions.
According to calculations from Global Energy Monitor, the private equity fund KKR, for example, emits 6,500 times more climate-damaging greenhouse gas emissions from its 188 fossil-fuelled power plants than the private equity fund itself discloses to Danish pension funds. The number of power plants is verified by KKR.
Yet the CO2 emissions from these power plants are not included in the pension funds’ statements on their climate footprint. This is evident from KKR’s own climate reports.
According to Jan Kæraa Rasmussen, PensionDanmark receives completely different emission figures directly from KKR. However, PensionDanmark does not want to disclose the specific figures they receive directly from KKR.
“As an investor, we receive emissions data from KKR that, for our very limited ownership share alone, exceeds the figure that the report (Danwatch’s information on KKR’s emissions, ed.) states as the total emissions reported for KKR,” says Jan Kæraa Rasmussen.
Danwatch has been in contact with all 13 pension funds included in this article. PensionDanmark is the only one to receive unique emissions data directly from foreign private equity funds for use in the pension fund’s CO2 statement.
In an email to Danwatch, PensionDanmark states that they consider Global Energy Monitor’s emission data for KKR to be “deeply misleading” and “opaque in relation to the method used”. PensionDanmark has not wished to elaborate on the criticism or share emission data.
Global Energy Monitor data is used by major global banks such as UBS, World Bank and HSBC, the International Energy Agency (IEA) and a number of universities, including Standford. Major media outlets such as The Washington Post and Financial Times, as well as consulting firms Deloitte, Boston Consulting Group and EY are also on the user list.
Until 2023, the private equity fund Carlyle Group has also failed to inform Danish pension funds about 277 million tonnes of CO2 emissions over a period of 10 years from 155 fossil fuel power plants.
These emissions are also not reported to Danish pension funds that invest or collaborate with Carlyle Group.
Similar observations are found for several of the other private equity funds, says project manager Alex Hurley from Global Energy Monitor, with whom Danwatch and Økonomisk Ugebrev have collaborated on the mapping of power plant owners.
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