The Green Portfolio Programme – run by New York-based KKR with Environmental Defense Fund (EDF), an environmental NGO – has seen eight portfolio companies reduce 345,000 tonnes of carbon dioxide emissions, save 8,500 tonnes of paper and avoid 1.2 million tonnes of waste, KKR and EDF announced last week.

A further four companies have recently joined the programme, meaning that just under 20% of KKR’s portfolio companies are involved, and Elizabeth Seeger, KKR’s manager of the programme, said that she expects to announce new enrollees in the next couple of months. 

The programme involves KKR working with portfolio companies to identify and manage the most financially and environmentally material issues to the participating companies. For example, discount retailer Dollar General saved $106 million – 1% of its 2008 revenues – via waste reduction and energy efficiency improvements.

Other participants include software company Sungard, which reduced emissions from its data centres, and mattress maker Sealy Corporation, which reduced waste from its operations and improved its delivery fleet efficiency.

“These are incredibly powerful examples of better environmental management,” said Tom Murray, EDF’s managing director for corporate partnerships. “What makes KKR an important partner is … the rigour they bring to measuring financial impacts.”

He added that EDF is seeing growing interest from the private equity industry in improved environmental performance. In March, Carlyle announced it was working with the NGO on the ‘EcoValuScreen’ due diligence tool designed to identify upside opportunities from better environmental management (as opposed to the downside risks that environmental due diligence typically focuses on).

“Whether you’re an investor, in private equity or in public equity, the definition of value is changing,” Murray said. “You’re going to be evaluated on a broader set of metrics – companies and investors need to be prepared for that. In the private equity space, we’re seeing a real appetite.”

He added that EDF is unlikely to announce any other public collaborations in the KKR or Carlyle mould, but he said the organisation is talking to many of the largest private equity firms.

“Our goal is that the environment becomes part of industry best practice for value creation … Over the last two years, the conversation has changed from ‘why should we do this?’, to ‘how can we do it?’.”

Mark Nicholls