Critics might try to blame private equity for broader concerns about the oil and gas industry, but the truth remains clear: private equity is – and will continue to be – an integral player in the ongoing energy transition.

•  A new report seeks to villainize private equity for its investments in the oil and gas industry – and conveniently ignores private equity’s demonstrated track record of financing the clean energy transition.

• For over a decade, private equity has played a critical role in facilitating the transition to renewable energy – investing over $136 billion in American cleantech companies big and small that are innovating in energy alternatives like wind and solar.

• The ongoing energy transition is just that – a transition. As private equity helps the United States bolster its renewable energy capacity and bring emerging technologies to scale, remaining strong within the global oil and gas landscape is imperative for energy security.

As a new report trots out incomplete, tired critiques of private equity’s energy sector investments, private equity continues to solidify U.S. leadership in the ongoing cleantech revolution – all while supporting American businesses and workers and bolstering domestic energy security.

This report, seeking to use private equity as a scapegoat for broader activist qualms with the oil and gas industry, creates a zero-sum-game for U.S. energy production that ignores reality. As President Biden said in his 2023 State of the Union Address, “We are still going to need oil and gas for a while.” Private equity is actively helping the United States straddle both sides of this fence: keeping the lights on with oil and gas in the present while making strides towards a cleaner energy future.

Private equity investments help improve oil & gas sector sustainability

Recognizing that the transition to renewables will take time, private equity is committed to making smart investments in U.S. companies that ensure domestic energy security – all while helping the sector become more sustainable.

Private equity’s active oil and gas investments are key for advancing sustainability within the sector – even amidst the rollout and scaling of cleaner energy technologies. For example, oil and gas companies backed by private equity firm NGP “recorded a drop of 14% in direct emissions and 40% in methane intensity last year.”

As another example, private equity has also supported Houston-based Hilcorp Energy in pursuing more sustainable oil and gas production – adding to the industry’s demonstrated track record of helping carbon-intensive companies develop and meet “Paris-aligned” decarbonization goals. By partnering with private equity, Hilcorp has been able to responsibly invest in aging oil wells, whose environmental performance has “often been neglected.” As a result, the company has cut its greenhouse gas emissions and operational energy use by over 40% and reduced methane emissions by 35% since 2019 – valuable sustainability gains made possible with private equity’s support.

Another reality this report ignores: private equity-backed oil and gas funds have seen a recent decrease in total dollars raised. As Preqin data cited by the Wall Street Journal indicates, fundraising was down 40% in 2022 year-over-year. Even as continued investments in oil and gas have a strategic role in the energy transition, critics seem to ignore the important reality that fewer and fewer dollars are heading in this direction.

Private equity investments advance U.S. cleantech, benefitting businesses and workers

Beyond oil and gas, private equity is also leading the charge in renewable energy and cleantech investments. In fact, since 2012 private equity firms have invested over $136 billion in cleantech companies across 756 investments – with $65 billion capital infusions in the last three years alone. In 2022, private equity firms invested “a single-year record” of $26 billion in renewable energy and cleantech – and these trends show no signs of slowing down in 2023, even amidst uncertain market conditions and high interest rates.

Private equity has increasingly been turning to opportunities in renewable energy to secure America’s competitive edge in the energy transition, outpacing global competitors like China. According to a report from BloombergNEF and The Business Council for Sustainable Energy covered in POLITICO, the United States “continued to dominate in…private equity investments in clean technologies” in 2022 – surpassing China with over $25 billion in U.S. clean tech investments compared to the former’s $6.9 billion.

For American businesses, workers, and citizens, private equity’s investment in the energy sector is critical. As underscored by the American Investment Council’s 2023 Energy Report, “PE invests in the energy sector even when others avoid it, which can help reduce prices for everyday Americans” – supporting American businesses and workers in the cleantech space. Take a look at just two examples:

• Summit Ridge Energy: Thanks to a $175 million investment from AIC member Apollo, leading solar industry player Summit Ridge Energy was able to scale its business and bring underserved communities more renewable energy options.

• First Reserve: Alongside Invenergy, a portfolio company of AIC member Blackstone, AIC member First Reserve financed and developed Scranton, Pennsylvania’s Lackawanna Energy Center. As a major contributor to a $1.5 billion investment in 2016, First Reserve helped create over 1,200 construction jobs and thirty operations positions. This project yielded impressive benefits for the local community: more than $285 million invested into the local economy; hundreds of thousands of dollars in donations to local nonprofits; six scholarships to students at Lackawanna College’s School of Petroleum and Natural Gas; and $170 million in compensation to construction workers.

Read more: Private Investment Leads the Way on Emerging Energy Technologies

The bottom line

Though critics might find it convenient to blame private equity for broader qualms with the oil and gas industry, the truth is clear: private equity continues to support the U.S. energy transition – ensuring domestic energy security, businesses, and workers remain on top while building a more sustainable future.