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Why a Major Private Equity Firm Is Investing in Sustainability, Part I

The University of Colorado at Denver Business School recently hosted an event in which Elizabeth Seeger, a principal at Kohlberg Kravis Roberts & Co (KKR) who manages its responsible investment efforts and Green Portfolio Program, outlined the reasons why KKR – one of the world’s largest and most successful private equity investors – has embraced sustainability as a key strategic driver for enhancing shareholder value in its investment portfolio. About 100 local business people, students and faculty attended the event, which also featured Ellen Sandberg, Vice President at First Data Corporation, a KKR-backed company.

KKR’s global private equity investments number nearly 80 companies with more than $200 billion in revenues and 900,000 employees. Seeger explained that the acquisition of TXU, the largest Texas utility company, in 2007, highlighted how KKR could proactively manage sustainability and engage with stakeholders. It was the first time that non-investors were provided a seat at the table before a deal happened. This ultimately led to the firm forming a long-term institutional partnership in 2008 with the Environmental Defense Fund (EDF) to assist in the process of identifying ways in which sustainability-based thinking could enhance the firm’s role as a creator of increased shareholder value.

In 2009, KKR furthered its commitment by becoming one of the first US-based private equity firms to sign on to the United Nations’ Principles for Responsible Investment. This coincided with the launch of Green Portfolio Program (GPP) in which they worked with EDF and three of KKR’s private equity portfolio companies in a pilot program designed to achieve cost savings through initiatives aimed at cutting energy and water consumption, and reducing waste. Subsequently KKR has steadily expanded the GPP and, as of the end of 2011, has announced a financial impact of $365 million from these initiatives across 13 of the companies involved in the program and estimates that it has avoided 2.2 million tons of waste and 810,000 tons of GHG emissions, and reduced water usage by 300 million liters.

Seeger emphasized that the GPP is a rigorous and disciplined effort to identify, implement and track the results of environmental initiatives, but that it is the responsibility of each portfolio company to implement the most appropriate actions for its particular type of business. KKR concentrates on creating shared value through the formation of partnerships between its various portfolio companies and through workshops and seminars designed to highlight sustainability success stories. Its portfolio also includes a number of investments in companies offering solutions to some of society’s sustainability challenges such as renewable energy and water treatment products/services.

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One thought on “Why a Major Private Equity Firm Is Investing in Sustainability, Part I

  1. How is the Green Portfolio Program different from Dow Jones Sustainability Indices, FTSE4Good, or even the Newsweek Green Rankings? KKR’s efforts toward a standard for reporting data will hopefully reduce or eliminate the proliferation of corporate sustainability lists.

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