Green is the Color of Money
Given all the negative publicity and attention to PE these days it’s too bad more firms haven’t embraced and publicized green initiatives across their portfolio. If you have to lean operations to create value why not save the environment at the same time. Especially since looking at KKR’s Green Portfolio Initiative the returns can be significant. According to KKR in 2011 with 13 participating portfolio companies they were able to avoid $365 million in costs, 810,000 metric tons of GHG emissions, 2.2 million tons of waste, and 300 million liters of water.
Why haven’t more PE firms taken green initiatives seriously, or at least publicized their results? Apparently Carlyle has “adopted environmental, social and corporate-governance (ESG) principles due to influence from investors” however they are not sure it leads to more cash flow. In this case I think the difference between KKR and Carlyle is that KKR incorporated their Green Portfolio Program into their Capstone improvement plans where Carlyle only adopted principles to satisfy investors and didn’t believe in their impact. This is not to say Carlyle isn’t a hugely successful firm, they are, but they fall on the other side of the spectrum when it comes to creating value through operational improvement.
But what about other operationally focused PE firms like TPG, Blackstone, or even Bain Capital that have operating teams and could easily incorporate green initiatives into their improvement plans. Sure TPG and Blackstone mention sustainability on their website but I would guess they are whimpers to appease LPs. They surely don’t state they are generating value from sustainability. So why not focus on green initiatives and sustainability, the returns are there and the industry could use a bright spot.
What is this blog?
These are some of our insights along our value creation journey in private equity.
Instigator: Tamas Hevizi
- Value Creation 2.0 – The Quest for a Better PE Alpha
- Persistent Trends in Value Creation
- Macro Trends and PE Value Creation
- Why Can’t Management Outperform PE?
- Will China Transform Operational Value Creation?
- Green is the Color of Money
- Any Operating Model Could Work
- PE Group Purchasing makes Headlines
- Awards for PE Operational Excellence
- Great Books in Value Creation