Search and rescue workers in Maui.

Search and recovery team members check charred buildings and cars in the aftermath of the Maui wildfires in Lahaina, Hawaii, on August 18, 2023.

(Photo: Yuki Iwamura/AFP via Getty Images)

Private Equity Exposed for Profiting From Fossil Fuels and Disasters They Cause

"Firms like Blackstone should be ashamed of this sinister investment strategy that contributes to catastrophe and rebuilds after it strikes," a report author said.

In yet another instance of disaster capitalism, private equity companies like Blackstone have found two ways to profit from the climate emergency: first by investing in fossil fuel infrastructure and then by buying up restoration companies that clean up after increasingly extreme weather events.

That's one of the main takeaways from a report released Thursday by the Private Equity Stakeholder Project (PESP) and Resilience Force titled Private Equity Profits From Disaster at the Expense of Workers, Communities, and Climate.

"Firms like Blackstone should be ashamed of this sinister investment strategy that contributes to catastrophe and rebuilds after it strikes," report co-author and PESP research coordinator Azani Creeks told Common Dreams.

"The investments Blackstone has made in both ServPro and its fossil fuel companies have long-term consequences that are borne primarily by already marginalized communities in the United States."

The report documents a shift that took place in the disaster recovery industry following Hurricane Katrina in 2005. Before that historic storm, cleanup work in a given area was usually done by smaller local companies.

"After the massive efforts required post-Hurricane Katrina and the increasing frequency and magnitude of climate disasters, private equity firms saw an opportunity to consolidate the market by buying up smaller companies," Creeks wrote in the report.

And the trend continues. Private equity firms bought 72 restoration companies between January 2020 and June 2023, with the number of purchases rising each year. They acquired 13 in 2020, 20 in 2021, 25 in 2022, and 14 during just the first six months of 2023. If that pace continues through the end of the year, the 2023 total will rise to 28, more than double the yearly purchases three years ago.

The report includes a list of 14 major disaster relief companies owned by private equity firms, five of which also invest in fossil fuels. For example, Blackstone, which owns ServPro, also bought Ohio's General James Gavin Power Plant—one of the leading single sources of coal pollution in the U.S.— in 2017.In another example, Louisiana-based disaster relief company the Lemoine Company also manages Lemoine Pipeline Services. The company is owned by the private equity firm Bernhard Capital Partners.

This profit-making strategy has major environmental justice implications.

"The investments Blackstone has made in both ServPro and its fossil fuel companies have long-term consequences that are borne primarily by already marginalized communities in the United States," Creeks told Common Dreams, adding that ServPro often hires immigrants and people of color who are vulnerable to unfair and unsafe labor practices like wage theft.

"Furthermore," Creek added, "Blackstone's financing of fossil fuel assets also inflicts direct harm on these same communities, who bear the brunt of toxic emissions and climate disasters."

Even if private equity firms aren't funding fossil fuels, their acquisition of restoration companies still means they have a responsibility to workers and communities, the report argues.

As disaster restoration companies have consolidated and gone national, they have organized themselves in a series of franchises and subcontractors. Of the 72 companies acquired in the last three years, more than 80% of them were instances of larger companies buying up smaller ones. These often-opaque corporate structures can make it difficult for workers to challenge their employers over issues like wage theft or unsafe working conditions. Undocumented workers are especially vulnerable, because any complaint may be met with a threat to contact immigration authorities.

"Though issues with wage theft and worker health and safety have long existed in the construction and disaster restoration industries, with an investment from the world's largest asset manager, you would expect to see these issues less frequently as more resources can be implemented to protect workers," Creek said. "Instead, the problems at ServPro and other private equity-owned disaster restoration companies persist, with even less mechanisms for accountability and public scrutiny than before."

One worker named Joél Salazar, who is also an organizer with Resilience Force, shared his experience ServPro subcontractor Royal Services. He said the company offered to pay his way from Florida to Colorado in early 2022 to help with wildfire recovery there, and promised him 40-hour workweeks and weekly paychecks when he arrived. But the travel costs never materialized, weeks started out closer to 20 hours, and the pay ended up being every other week instead.

"The company is stealing from me."

What's more, the payment was made via a Visa card. When Salazar said he had to return to Florida, the company canceled his card despite the fact that a significant amount of his earnings were still on it.

"The company is stealing from me," he said in the report.

Salazar said he wanted private equity firms and investors to be aware of what their companies were doing.

"Investors, I'm calling to ask you to consider worker safety at the companies you invest in, especially the private equity firms you rely on for profits," he said.

Another problem is unsafe working conditions. Companies owned by private equity firms racked up a total of 194 federal Occupational Safety and Health Administration violations between January 2015 and January 2022. The most common violations were exposing workers to asbestos and failing to provide them with respiratory protection, followed by failing to communicate dangers and protect workers from falls.

Recovery workers are organizing to protect themselves through the group Resilience Force, which says it is "building a strong, stable, inclusive, million-strong workforce that will be able to perform year-round climate preparation and adaptation work, as well as rebuild after disasters."

The group's founder and director Saket Soni said in the new report, "We must ensure that these companies, and their private equity backers who profit from disaster, pay and protect the resilience workers who are essential to helping communities adapt and recover."

What's better for workers will be better for the communities they help, as well. The report found that the private equity-owned firms engage in price gouging. For example, a ServPro franchise settled with the state of North Carolina for overcharging residents following Hurricane Florence.

The report highlights the legislative efforts of U.S. Rep. Pramilla Jayapal (D-Wash.), whose Climate Resilience Workforce Act would fund jobs and training through grants and make workers less vulnerable by providing a pathway to citizenship for immigrant workers and banning employers from asking about criminal history.

"The innovative Climate Resilience Workforce Act responds to the worsening climate crisis at the scale necessary by investing in a skilled workforce that is capable of not only responding to but preparing for the destructive impacts of climate change," Jayapal said when the bill was introduced in 2022. "As we create millions of good-paying, union jobs and center the very communities who are disproportionately impacted, we are finally building back better, greener, and stronger."

The report also issues recommendations to private equity firms to better protect the workers at the companies they own, such as setting up complaint lines, minimizing the use of subcontractors, funding programs to monitor their companies, and allowing their workers to unionize.

Finally, Creeks noted that firms like Blackstone manage public pensions, and have a responsibility to these workers as well.

"Public employees, such as teachers, nurses, and firefighters, have a right to know that their pension dollars are being used to purchase fossil fuel plants that are contributing to climate disasters all over the country," Creeks told Common Dreams. "In turn, their retirement capital is also being used to buy companies that profit off of these very disasters."

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