KKR initiates trailblazing green initiative

The mega-buyout firm has entered into a “Green Portfolio” partnership with the non-profit organisation, Environmental Defense Fund, to help its portfolio companies reap environmental and financial benefits.

Private equity mega-buyout firm Kohlberg Kravis Roberts & Company has partnered with the Environmental Defense Fund to create a three-step “Green Portfolio” programme geared towards measuring and improving the environmental performance of KKR’s portfolio companies.

Metric selection, a pilot programme and a national rollout will help achieve three goals, EDF vice president Gwen Ruta told PEO: measurable and significant environmental benefits, business benefits for the partner companies and a model to become standard industry best practice.

“The underlying key to the whole project is that you manage what you measure,” Ruta said. The first stage of the programme is to select environmental metrics in areas including efficiency, waste generation, water consumption, greenhouse gas emissions and use of toxic substances. The result will be managing and tracking environmental performance in the same way KKR currently tracks financial performance, Ruta said.

Over the next three to six months, a pilot programme will be put in place to “kick the tyres” of the “Green Portfolio” within a handful of companies. Although candidate companies have been discussed internally, no official selection has been made.

“We want to take some of the best practices that we’ve developed with other companies and apply them in the KKR portfolio companies where they make sense,” Ruta said. EDF’s experience with Walmart can be applied to retail companies. The non-profit organisation also has experience managing the environmental impact of large fleets of vehicles through its work with companies including FedEx and UPS.

KKR will publish results of the project following the pilot programme, and after the project is rolled out among a broader range of US portfolio companies.

KKR’s diverse portfolio of companies will offer the potential to look at results across a broad range of sectors, with Ruta adding that the private equity model provided “some flexibility to achieve improvements that might be difficult for companies that are beholden to a quarterly reporting schedule.”

The relationship between KKR and EDF goes back to their collaboration during the 2007 acquisition of TXU by KKR and Texas Pacific Group. “[That collaboration] resulted in a number of coal fire power plants than were planned to be built not to be built and a number of other commitments on TXU and the investors’ parts in terms of reducing TXU’s greenhouse gas footprint but still doing so in a way that made sense for them as a business,” Ruta said.

KKR is also taking responsibility for its own environmental footprint as a part of EDF’s newly launched Climate Corps Program. That programme deploys trained MBA students to conduct energy audits, analyse the financial and environmental benefits of potential changes and implement an energy improvement plan. KKR will undergo its energy audit this summer.

The New York-based EDF is a national non-profit organisation using science, economics, law and private-sector partnerships to seek solutions to environmental problems.