The Private Equity Industry Just Got Greener

This past summer, one of the world’s largest private equity firms, Kohlberg Kravis and Roberts (KKR) released updated results from the company’s Green Portfolio Program and their accomplishments are impressive.  Across eight portfolio companies, the program has generated a combined savings of more than $160 million in operating expenses, the avoidance of over 345,000 metric tons of greenhouse gas emissions and the elimination of 1.2 million tons of solid waste and 8,500 tons of paper. Detailed results from the eight portfolio companies that participated and reported in the program are as follows:

(Image courtesy of Environmental Defense Fund)

KKR’s Green Portfolio Program began in 2008 and was developed in partnership with Environmental Defense Fund (EDF) as a means for improving the economic and environmental performance of KKR’s portfolio companies. The program originally launched with three pilot companies and quickly grew to include eight companies by 2009.  KKR has now announced plans to expand the program to include 20% of its global portfolio.

Furthermore, the private equity industry is poised to become even greener because the EDF’s Green Returns Program is currently expanding its reach through a new partnership with the Carlyle Group. Through this partnership, the Carlyle Group and EDF have pioneered the development of the industry’s first-ever pre-investment due diligence screen.  Known as the “EcoValuScreen,” this tool analyzes the environmental factors specific to a private equity (PE) investment through the lens of potential value creation, versus the traditional PE perspective of risk mitigation.

At first glance, a partnership between one of our nation’s leading environmental non-profit organizations and a private equity industry giant may seem to be an unlikely match. But beneath the surface, the common strategy is one of leverage.  Similar to how sustainability managers have come to view supply chain management as a strategy that finds leverage through the one-to-many relationship model, EDF, KKR and the Carlyle Group are looking to do the same through the environmental management of PE portfolio companies. According to EDF, the investments of private equity firms account for roughly 10% of the U.S. economy and nearly 6 million Americans are employed by a company that is backed by a private equity firm. These numbers illustrate the potential impact that can be attained if widespread transformation within the private equity industry is accomplished.

For business managers interested in starting or expanding on internal sustainability programs that connect environmental performance and business value, the Green Returns Implementation Workbook provides detailed guidance on the initiatives that have driven the savings outlined above.

David received his undergraduate degree in Geographic Information Sciences from James Madison University and completed an M.A. in International Development at Clark University. With over 10 years of experience in the field of environmental sustainability, David has worked for organizations such as Environmental Defense Fund, USDA, USGS and the Smithsonian Institute.Currently, David is a NetImpact member and an MBA candidate at the Presidio School of Management where his research focus is on developing market incentives for investment in environmental sustainability.

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