Blackstone, one of the largest private equity firms in the world, officially changed the name of its dedicated energy investment fund to include the phrase “energy transition” in 2022, having already ceased investing in oil and gas production five years earlier. The pivot toward a new energy future has not diminished interest in the fund. In mid-October, Blackstone announced that the fund pulled in $8.7 billion in investor money this year, reportedly turning away an additional $3 billion to stay under its maximum investment cap.
Blackstone’s is one of several energy transition funds at private equity firms that have consistently grown over the past decade. That growth has continued even as general climate-oriented investment has fallen over the last few years. Colloquially, “energy transition” refers to the shift from fossil fuels to renewable energy that is necessary to limit the worst impacts of climate change. But on Wall Street, the term can mean something a bit different. Some transition funds — including Blackstone’s — see opportunities for profit in natural gas, data centers, and rising electricity costs.
“I know a lot of the investors out there do consider gas a transition fuel,” said Ryan Loughead, a senior associate and former climate solutions analyst for BloombergNEF, an energy research firm.
Private equity funds take new investor money every few years, and then use it to buy existing companies, maximize their profits, and then sell them, returning the money from the sale to investors. Unlike publicly traded companies, whose stocks are available for anyone to buy, private equity firms typically only take investments from large organizations, like pension funds, or very wealthy individuals, and they have faced criticism for prioritizing returns at the expense of workers and the environment.
The transition to renewable energy has been a booming business for private equity firms. “Transition funds” in private equity have raked in $178 billion between 2021 and the beginning of 2026, triple the amount raised by comparable funds dedicated to fossil fuels and general energy, according to Loughead’s research. They’ve maintained their popularity even as other forms of climate-related investments have flagged in the United States, with climate-related venture capital on track to suffer its worst year this decade. (While private equity funds buy out established companies, venture capital funds make smaller investments in startups.)
These shifts have coincided with changes in federal policy, as well as the overall economy. The Biden administration’s signature climate law once spurred innovation in new technologies, but Republicans in Congress repealed most of that legislation last year. Meanwhile, the tech industry’s data center buildout is creating surging demand for electricity and drawing trillions of dollars from investors.
In the financial industry, the energy transition has grown into a sophisticated economic trend with established players and markets, said Dan Cohn, an energy finance analyst with the Institute for Energy Economics and Financial Analysis, a think tank focused on the energy transition. Private equity funds don’t typically demonstrate investor interest in a budding industry so much as a view that the industry is becoming economically important.
“Investors are sensing oncoming scarcity [of electricity] and are positioning themselves accordingly,” Cohn said. “That speaks to both the moment of rising electricity demand, but also the maturity of clean energy technologies.”
But while these funds seek to capitalize on high demand for electricity, they don’t all show a clear commitment to reducing emissions. Blackstone’s fund is explicit in its view that methane gas, a fossil fuel, is an essential component of the energy transition. The fund no longer invests in oil and gas fields, but it does invest in natural gas plants. When Blackstone rebranded the fund in 2022, the fund’s director, David Foley, explained why natural gas plants were still on the table. “A lot of the capital invested in the energy transition is going into simple renewable power generation assets like solar and wind,” he told an industry publication. “While this is important, just adding renewables to the grid doesn’t necessarily mean you can shut down and remove existing sources of power, such as coal and gas.”
This year, the fund announced investments in six companies, including a natural gas plant operator and a data center cooling technology company, alongside a company focused on renewable energy development and some transmission and grid technology companies. Blackstone did not reply to a request for comment.
Meanwhile, the private equity firm Brookfield governs its transition funds partly through an explicit commitment to decarbonization and emissions reductions. The company has said it can invest in natural gas in cases where it replaces dirtier fossil fuels, but Brookfield has also drawn criticism for describing gas expansion as part of the energy transition.
Similar funds in Europe, like Copenhagen Infrastructure Partners’ Energy Transition Fund, are far more focused on clean energy sources like green hydrogen, with little emphasis on natural gas.
“‘Energy transition’ is a flexible term,” Cohn said. “And I’m unsurprised to see either the gas or electrical equipment and data center-related companies in some of these funds. That is perfectly consistent with how I know some investors think about the energy transition.”
BlackRock, another private equity giant unrelated to Blackstone, explicitly defines “transition” investing as something different from “sustainable” investing: “not all sustainable strategies are transition, and not all transition strategies are sustainable,” its website reads.
That partial overlap could complicate investors’ claims about how sustainable their portfolios are.
At least three major government-managed investors in Blackstone’s energy transition fund have explicit climate investing goals. The Oregon Treasury, Minnesota State Board of Investment, and San Francisco Employees’ Retirement System all have some form of climate-related goal or plan for their investments. Combined, these entities have committed a combined $525 million to the fund, according to Private Equity International, an analytics firm.
These investors did not reply to requests for comment before publication of this article, but the wide range of standards for climate- and energy-related investments has already created confusion. In Oregon, a state representative formally asked the state’s treasury this year to more clearly define what it reports as “climate-positive” investments, which it uses as a category in its public reports.
Investors may have a financial incentive to include gas in their view of the energy transition. Transition funds that include gas tend to have slightly higher returns than those that don’t, Loughead said. And Loughead and Cohn both said the massive rush to invest in the data center boom has permeated funds nominally concerned with the clean energy transition.
Off Wall Street, the question of whether natural gas and data centers have a role to play in the energy transition is hotly debated. Natural gas has cut emissions from the power sector when it has replaced coal, while data centers have spurred investment in grid improvements and clean energy sources. But using natural gas still produces significant emissions — both when it’s burned and when it leaks out of infrastructure — and data centers are spurring more fossil fuel use, potentially slowing progress on global power sector emissions. Plus, some grids are already finding ways to provide reliability with cleaner alternatives to gas, like batteries, which can store renewable energy to use when the sun isn’t shining and the wind isn’t blowing. Most climate and environmental groups argue emphatically that gas should not be seen as a transition fuel.
“Natural gas no longer functions as a credible bridge in the energy transition,” wrote Shruti Shukla, a senior advocate on international energy at the Natural Resources Defense Council in a 2025 article, adding that the fuel “risks slowing decarbonization, raising system costs, and locking economies into avoidable volatility.”
And in the long run, it may not even come to be seen on Wall Street as a questionable investment, according to Cohn. As fuel price spikes continue driving the world toward renewables, fossil fuels may become less and less attractive as investment opportunities.
“There are other very prominent solutions like solar, wind, and batteries, which will mature and continue to see price declines, and so the view that you need gas is increasingly contested,” Cohn said.”
