Carlyle looks to go green

The Carlyle Group is partnering with the Environmental Defense Fund to create a process to analyse potential investments for ways to improve efficiency and savings through environmentally-friendly enhancements.

To develop the process, Carlyle, working with the EDF and The Payne Firm, an international environmental consultancy, examined more than 320 current and former portfolio companies to identify opportunities to generate savings and minimise environmental impacts in areas like greenhouse gas emissions, waste management, water use, priority chemicals and forest products.

“Our goal is to increase returns for our investors while enhancing environmental performance,” William Conway, managing director and co-founder of Carlye, said in a statement. “We believe that financial performance and environmental improvements are complementary and in the best interest of our investors.”

Carlyle joins Kohlberg Kravis Roberts in focusing on ways to enhance the environmental sustainability of its investments. KKR has been working with the EDF since 2008 to find ways to improve its existing portfolio companies’ impacts on the environment. The different between the two programmes is that Carlyle is focusing on new investments, while KKR has gone back through its existing portfolio, a spokesperson for the EDF told PEO. KKR has included a mroe recent investment, Oriental Brewery, in its green programme.

KKR’s hired Elizabeth Seeger from the EDF to manage the expansion of its “Green” programme. Seeger joined the firm’s operations team, KKR Capstone, and her responsibilities include the development of reporting systems as part of the firm’s compliance with responsible investing guidelines.

With private equity, you have the ability to work with one company but influence practices across a portfolio of companies. Tom Murray

KKR reported earlier this year 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.

The EDF tries to work with private equity because firms have influence over whole portfolios of companies, according to Tom Murray, managing director for corporate partnerships at the EDF. “It's kind of a sweet spot for us,” Murray said about private equity. “It's about leverage, but a different kind of leverage than you usually hear about with private equity.

“We've worked in partnerships with leading companies to drive solutions to environmental problems that make business sense,” Murray said. “We've done that with Wal-Mart, McDonald's, FedEx, in lots of one on one partnerships. With private equity, you have the ability to work with one company but influence practices across a portfolio of companies.”

Murray said there is a strong correlation between enhanced environmental management practices and strong financial performance. “This is an incredibly powerful way to drive down costs and reduce your environmental footprint,” he said. “The bottom line value of this is first and foremost what's making these leading private equity firms” work with us.

Private equity firms have been embracing so-called environmentally-friendly principles for the last few years. A survey done by the United Nations Private Equity Principles for Responsible Investment (PRI) found that 90 percent of limited partners wanted GPs to address issues of environmental, social and corporate governance. The survey focused on 15 major institutional investors.

In February 2009, about a dozen mega-firms represented by Washington, DC-based lobbying group the Private Equity Council signed up to a set of socially responsible investments guidelines. The firm included Carlyle and KKR.