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Maybe Wall Street Is Beginning to ‘Get’ Sustainability: More Evidence

In a recent EL column I suggested there are signs that some of the more savvy elements in the mainstream US financial community are beginning to pay attention to the sustainability initiatives of major public companies as an integral part of the process of assessing enterprise value. Still just a few straws in the wind, but encouraging nonetheless.

Now, in the midst of all the irrelevant and mostly uninformed drivel swirling around in the presidential campaign concerning the role of private equity groups (PEGs) in the US economy, comes this startling press release from Kohlberg, Kravis, Roberts (KKR), perhaps the best known and most respected of the large, US-based PEGs. What it shows beyond a shadow of doubt is that KKR, at least, clearly understands the business case for sustainability and is putting its very considerable financial muscle into implementing a wide range of green initiatives in its portfolio companies.

What we see here – and on the Green Portfolio web site – is nothing less than a mandate from the highest levels of KKR’s leadership that all of their investment portfolio companies shall re-examine their operations to see where green and sustainability initiatives can reduce costs, mitigate risk and drive innovative new services and products.

This is big news on several counts. First, the sheer scale of the KKR effort is impressive. Since its inception in 2008 participating companies have reported cumulative cost savings of $365 million, 810,000 metric tons of GHG emission reductions, the avoidance of 2.2 million tons of waste production, and 300 million liters in reduced water consumption. This is needle-moving stuff!

Secondly, KKR is driving the Green Portfolio Program in many different kinds of companies all  around the world, thereby demonstrating their understanding that resource constraints are a global challenge that will impact companies in every industry. Radical resource productivity improvement is the fundamental driver of most of the initiatives taking place in KKR companies, but the company has also become an increasingly active supporter of “responsible investing”, making its hefty presence felt in organizations such as CSR Europe. KKR Founder Henry Kravis states “environmental performance and business performance can go hand-in-hand”, especially when the environmental goals are intelligently chosen to relate to the strategic needs of the business.

Finally, the Green Portfolio Program has been a joint initiative in which KKR has partnered with the Environmental Defense Fund. Who would have thought ten years ago that some of the most hard-headed, financially savvy – many would say ruthless – investors in the world would team up with a group of environmental activists to show how the resources of the global business community can be put to work to help resolve the planet’s sustainability challenge.

Well worth noting too that all this has become central to KKR’s own corporate strategy during three of the worst years in the global economy in living memory.

Whether you regard the major PEGs as part of Wall Street or not, I would personally rather have the brightest financial minds in the US economy driving enterprise value through sustainability initiatives in real companies delivering real products and services that the world needs than dreaming up exotic, incomprehensible financial products that create no value for society and sometimes not even for their own shareholders – J.P. Morgan please note!

Graham Russell is founder and principal at Trupoint Advisors, which helps companies achieve strategic success through sustainable business initiatives. Russell writes and speaks on the subject of sustainable business and teaches sustainability in the University of Colorado Denver MBA program. 

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2 thoughts on “Maybe Wall Street Is Beginning to ‘Get’ Sustainability: More Evidence

  1. Thanks for this, Mike. I sense you’re right and there are several recent studies purporting to show the positive relationship between sustainability reporting and shareholder value creation. However, most of them have been done by academics, sometimes in conjunction with one of the big consulting firms (KPMG etc.) and there’s not a lot of acknowledgement directly from the Wall Street analysts who actually make the buy/sell recommendations that they are including this information in their thinking. Maybe this is coming too …..eventually!

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