Pursuing the energy transition requires managing the intersecting forces of energy availability, energy security and energy access – while simultaneously looking to decarbonize our energy systems. 

As the world looks to transition our energy systems over the coming decades, at Carlyle we believe investment opportunities will not represent a simple binary between “green” and “brown” businesses, but instead a complex interplay of our global economy and energy systems that will demand tremendous amounts of capital.  

To this end, at Carlyle, we leverage our global investment platform to accelerate the energy transition by investing across the full suite of electrons and molecules that make up our energy systems. Through our Renewable and Sustainable Energy platform, we seek to increase the amount of new renewable energy generation capacity, along with grid-stabilizing technologies such as storage and bi-directional charging; through our Corporate Private Equity platform, we support transition enablers, such as industrial opportunities manufacturing components needed for renewable energy development; and through our International Energy platform we invest in businesses that we believe have potential opportunity for value creation through decarbonization, for example through “gray-to-green” transformation of downstream oil & gas players to lower-carbon businesses. In our Global Credit platform, we lend to companies in the energy transition value chain and support certain of our borrowers with decarbonization activities.  

The Carlyle Climate Goals 

Given that the energy transition touches almost every sector and geography, Carlyle teams seek to assist certain portfolio companies across the globe to understand risks and potential value creation opportunities related to their carbon footprint, and then design and execute related decarbonization strategies that we believe drive financial performance. We recognize that companies across all sectors of the economy have a crucial role to play in decarbonizing, in order to remain competitive in the global economy. Hence, we are focused on providing the capital, expertise, and time to help global portfolio companies on this journey. This is why in 2022, Carlyle announced a goal to achieve Net Zero greenhouse gas (GHG) emissions by 2050 or sooner across Direct Global Private Equity and Global Credit investments, with two near-term goals: 

1. 75% of Carlyle’s in-scope1 portfolio companies’ Scopes 1 and 2 emissions will be covered by Paris-aligned climate goals by 2025; and 
2. Beginning in 2025, all new direct, majority-owned Corporate Private Equity, Energy and Power portfolio companies will set Paris-Aligned climate goals within two years of ownership. 

Since setting the goal2, 22 Carlyle portfolio companies have set Paris-aligned climate goals, and many more taking first steps to measure, report, and understand their emissions. 

An example of balancing energy transition and energy security  

VARO is a leading European energy company that manufactures, stores, and distributes conventional fuels and sustainable energies and services. Given its scale, we believe VARO can play a key role in facilitating Europe’s energy transition. In 2013, a fund managed by Carlyle acquired the company alongside the Vitol Group. Since then, both teams have worked closely with management to develop and implement a transformation strategy designed to capture opportunities associated with the energy transition, “future-proof” the company, and respond to the needs of employees, customers, and governments.  VARO aims to be the energy transition partner of choice for reliable, accessible, and sustainable energy solutions, and is positioned to empower customers to pursue their own decarbonization efforts. VARO is playing its own part in this effort, with a goal to achieve net zero emissions by 2040, in part through:  

• Expanding CAPEX investments to USD $3.5 billion between 2022 and 2026—with at least two-thirds invested in biofuels, biomethane and bio-liquefied natural gas (bioLNG), hydrogen, e-mobility and carbon removals;  
• Targeting to have 50% of group EBITDA come from the Sustainable Energies business by 2026; 
• Setting a near-term reduction goal of 40% absolute reduction of Scope 1 and Scope 2 greenhouse gas emissions by 2030 and 15% reduction in Scope 3 greenhouse gas emissions intensity by 2030, each against a 2022 baseline.  

With these ambitions in mind, the company announced its ONE VARO Transformation strategy in 2022, laying out its path to provide customers the sustainable and reliable energy solutions needed to reach net zero. VARO’s “twin engine” strategy balances both energy security and energy transition requirements for multiple segments of its customers’ businesses. Here, “Engine 1” represents the Conventional Energies business while “Engine 2” refers to VARO’s Sustainable Energies business. In order to help accelerate progress on this strategy, Carlyle worked alongside the VARO team to serve as a thought partner in the overall construction of the strategy. Carlyle also helped to recruit their current CEO, Dev Sanyal, who has a demonstrated track record in this work from his previous role as EVP of Gas and Low Carbon Energy at BP. 

Engine 1 consists of manufacturing, storage, trading, marketing, and distribution. This segment’s priority is to operate safely and reliably, reduce carbon emissions and intensity, and provide the energy security that is essential for customers.  

Engine 2 consists of strategic growth pillars that VARO believes have the most attractive low-carbon growth potential while also capitalizing on VARO’s core strengths. These pillars include:  

• Biofuels: VARO seeks to become an integrated producer of 2G advanced biofuels, including Sustainable Aviation Fuel (SAF). The company is targeting Biofuel production of more than 250,000 metric tons per year by 2026 with a long-term goal of more than 500,000 metric tons per year.  
• Biomethane & LNG: Aiming to be a leading producer of biomethane and bio-LNG to play a role in decarbonizing industrial and road transport sectors. VARO plans to double the current facility capacity from 300 GWh to 650 GWh by 2026.  

• Hydrogen: Utilizing its position as a hydrogen consumer to develop hydrogen production hubs.  

Carlyle continues to work closely with VARO’s management to support the implementation of this strategy and the advancement of its ambitious ESG agenda along key pillars including leadership and governance, partnerships, and motivated employees. In a changing world, VARO believes that reorienting the company into the high growth, low-carbon sector will generate EBITDA growth, and place VARO at the forefront of the energy transition.