Good karma

It’s generally accepted that private equity has somewhat of an image problem these days. Two brand name global firms, Abraaj Capital and KKR, have undertaken initiatives to combat the bad press.

Abraaj has released a slim volume detailing efforts to engage with its various stakeholders around the globe, touting its philanthropic activities, thought leadership, engagement with government and academic leaders and transparency in its media interactions.

Abraaj’s initiatives on this front aren’t new; the firm has made efforts to engage its stakeholders since its inception in 2002. Even then the firm said it recognised “concerns that [the private equity industry] operated as a club for the extremely wealthy alongside the vast pools of capital controlled by endowments and pension funds, and was increasingly seen by retail investors as a secretive and mysterious industry, serving to enrich a lucky few through financial acumen, leverage and opportunistic asset stripping.”

The book reveals interesting details about Abraaj's efforts on the PR front. In its newest efforts to engage with stakeholders beyond the limited partners, the firm has set up a four-pronged attack, with different programmes covering philanthropy, thought leadership, communications and regional outreach.

While many firms donate to non-profit organisations and encourage employees to volunteer their time, Abraaj has a formal system for its charitable works: its philanthropic activities are funded with 5 percent of its net management fee revenues, five days (three paid for by the firm) per year are designated for employees to volunteer on projects the firm supports, while staff are encouraged to donate 5 percent of their annual bonus. 

The appendices to the book Abraaj has sent out include a list of all the philanthropic projects it has undertaken since 2007, as well as the personal volunteer hours logged by individual employees

The firm’s outreach programme is unusual as well, because it goes beyond the traditional scope of what many private equity firms would consider relevant to building their brands. For example, while many GPs belong to industry bodies such as the European Venture Capital Association (EVCA), Abraaj said it engages with organizations with a broader focus as well, such as the Institute for International Finance and the Arab Business Council. Abraaj is also a regional partner for the World Economic Forum. 

Another example is the Abraaj Capital Art Prize, financial support awarded to five regional artists each year. The works of art produced during this sponsorship, Abraaj explains, “form a base from which we can organise international outreach initiatives to build a better understanding of the MENASA region and in turn showcase the pioneering role of Abraaj capital in this process”.

On the academic front, the firm also sponsors 10 MSc students from the MENASA regions each year and subsequently promotes those students’ theses.

KKR, meanwhile, has disclosed information on the progress of its Green Programme, launched in May 2008. The programme, undertaken in partnership with the Environmental Defense Fund around the time that KKR was seeking regulatory approval for the $45 billion TXU buyout, now includes 20 percent of KKR’s global portfolio, the firm said.

The programme helps portfolio companies to evaluate their environmental performance and set goals related to their environmental impact. Initially, eight of KKR’s portfolio companies participated in the programme. The four new companies now participating in the programme are First Data, Lehigh Phoenix, Oriental Brewery and Tarkett. Oriental Brewery, based in Korea, and Tarkett, based in France, are the first non-US companies to participate in the programme.

KKR has also hired Elizabeth Seeger from the Environmental Defense Fund to manage the expansion of the programme and “other responsible investment efforts”. Seeger will join KKR’s operations team, KKR Capstone. Her responsibilities will include the development of reporting systems as part of KKR’s compliance with responsible investment guidelines.

KKR said it is in the process of building an internal website where its portfolio companies will be able to report and manage data and access case studies and best practices for improving environmental performance.

KKR reported that US Foodservice, PRIMEDIA and Sealy together saved $16.4 million and prevented more than 25,000 metric tons of greenhouse gas emissions in 2008. Data for Accellent, Biomet, Dollar General, SunGard Data Systems, and HCA are expected to be released in spring 2010.