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EDF, E&Y Creating Private Equity Sustainability Tool

The Environmental Defense Fund (EDF) and consultants Ernst & Young are creating a tool to help private equity (PE) firms improve the environmental performance of their portfolios.

Under a pilot program called Green Ops for PE, participants will get assessments of the environmental opportunities within their portfolios, and suggestions for ways to maximize environmental and financial value.

The pilot will build on practices developed through EDF’s Green Returns program for the PE sector. EDF has used that process with private equity investors the Carlyle Group and Kohlberg Kravis Roberts & Co (KKR).

In March 2010, EDF helped Carlyle launch EcoValuScreen, a due diligence tool to identify value creation opportunities through improved environmental management practices. Carlyle is applying the process to new transactions in the U.S. – including the recent acquisition of nutritional supplement company NBTY, Inc.

KKR’s Green Portfolio Program was developed in 2008, and now includes 16 portfolio companies. KKR and the EDF say the program has yielded $160 million in savings over two years, saving 345,000 metric tons of CO2 emissions, 8,500 tons of paper, and 1.2 million tons of waste.

The new joint initiative will involve advisers from Ernst & Young’s private equity and sustainability teams. Boutique consulting firm Quantis will also help with data and life cycle assessments.

“We have seen many companies recognize significant ROI from assessing and investing in environmentally sustainable business initiatives,” said Steve Starbuck, Ernst & Young’s Americas leader for climate change and sustainability services. “Green Ops for PE could make these business opportunities more accessible across the PE sector.”

Ernst & Young announced in September that it had achieved a 15 percent reduction in the overall carbon footprint of its member firms in the Americas from the 2008 to 2009 fiscal year.

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