Beats | August 29, 2019

Blackstone’s embrace of impact investing brings new scrutiny

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, Aug. 29 – As legacy private equity firms move into impact investing (see, “For private equity giants, $1 billion is table stakes for entry into impact investing), the impact of the rest of their portfolios are getting a closer look as well.

The latest case in point: Blackstone, the $512 billion private equity giant that announced its new impact investing platform in May. At the time, Blackstone’s Jon Gray said the firm seeks to deliver value for investors “while also having a positive impact on the communities in which we operate” (see, “What we know about Blackstone’s impact initiative).

That made the firm’s decision not to sign the Business Roundtable’s recent CEO commitment to “stakeholders” stand out. Blackstone was among only eight firms not to sign the pledge; financial institutions like BlackRock and Vanguard did sign the statement.

  • Standing alone. A person familiar with the decision said the firm believes its portfolio is too diverse for it to sign on to a sweeping commitment to stakeholders. Blackstone maintains corporate social responsibility policies that are tailored to its owners and other stakeholders, the person said, and viewed the statement as potentially inconsistent with the firm’s commitments to its investor clients. Blackstone accounts for environmental, social and governance, or ESG, factors in its investment decisions, the person added, and plans to share more on its practices in coming weeks.
  • Stranded assets. Blackstone is doubling down on an oil and gas pipeline company it invested in earlier this year. Blackstone, which raised a $12 billion infrastructure fund, invested $3.3 billion for a 44% stake in Tallgrass Energy, a Kansas-based pipeline company. Tallgrass’ stock has fallen by nearly half in the bear market for energy stocks. Rather than cut ties, Blackstone is offering to take the company private. Blackstone may find it hard to divest quickly from fossil fuels, but holding on brings its own dangers.  Over the past decade, for example, BlackRock’s fossil fuel investments have lost investors $90 billion in value (see, “BlackRock’s stranded assets). 
  • Amazon burning. Blackstone is pushing back against a report in The Intercept that highlighted the role of two Brazilian companies, part owned by Blackstone, in deforestation in the Amazon rainforest. The firm says the projects in question were approved by International Finance Corp., an affiliate of the World Bank, which determined the project would reduce carbon emissions. 
  • Impact watch. Apollo Global Management, which is raising its own $1 billion impact investing fund, is also facing criticism. The firm “has a history of investing in businesses that prey on low and moderate income people,” according to the Private Equity Stakeholder Project. The February report cites investments such as OneMain Financial, one of the nation’s largest subprime installment lenders; Apollo Education, which owns for-profit University of Phoenix; and Inspire Communities, a developer and owner of manufactured housing communities.

Editor’s note: This post has been updated to include a link to Blackstone’s corporate social responsibility policy statement.