Green Technology Featured Articles
December 27, 2012

EDF Entices Equity Firms to 'Come Away from the Dark Side'



A new tool is offering private equity firms another way to assess performance. Aside from doing well, is the company also doing a world of good?  While private .equity firms routinely gauge other companies’ growth potential, earnings, management, and mission-critical product or service, today they also must be concerned about their own ethos and culture. Clients prefer to work with investment firms that are “walking the talk” when it comes to environmental, social and governance (ESG) issues. In response, the New York City-based nonprofit Environmental Defense Fund (EDF) has released a comprehensive, new ESG Management Tool —and it is available for free download from the group’s website.

Created in collaboration with the London-based consulting firm, Irbaris, the Excel-based software produces three outputs that can be used to evaluate a private equity firm’s current ESG management practices and make plans for future improvements across areas such as:

·         Commitment and leadership from the top

·         Access to ESG resources and expertise

·         Integration of ESG management into the investment process and portfolio company operations

·         Measuring and reporting of results

In less than an hour, users can assess current performance across 22 best practices for ESG management from options (e.g., Not yet started, Initial, Developing and Leading).

The tool defines, for the first time, the practices necessary to build a successful ESG management program and a framework to assess, analyze and improve ESG management at private equity firms of all sizes. 

"EDF has been a value-added partner for Carlyle in the development of our ESG practices," said Bryan Corbett, Principal at the Washington, DC-based asset management firm, The Carlyle Group. "As the private equity industry’s interest in ESG issues continues to grow, there's a clear market need for leadership and resources from EDF and others to help convert this growing interest into sound strategies for implementation and results."

"Leading private equity firms have already begun to capitalize on ESG opportunities and expectations are growing for the rest of the industry" said Tom Murray, managing director of EDF's Corporate Partnerships Program. "This active management tool will not only help firms assess current performance, but also develop plans to better integrate ESG management and create measurable environmental, social and financial results."

The Tool reflects the leading thinking in the industry and was informed by:  

·         EDF's experience partnering with prominent private equity firms including Kohlberg Kravis Roberts & Co. (KKR), The Carlyle Group and Oak Hill Capital Partners.  These partnerships combined have impacted over 30 portfolio companies and resulted in approximately $370 million dollars of operating cost-savings or revenue growth as well as 820,000 metric tons of avoided CO2 emissions.

·         Research and publications by the British Venture Capital Association, BSR, Doughty Hanson, Irbaris, Malk Sustainability Partners, PwC, Private Equity International, the United Nations Principles for Responsible Investment, and the World Wildlife Fund. 

·         Detailed peer review and feedback from a broad range of stakeholders, including Actis, Blackstone, Bloomberg (News - Alert), Business for Social Responsibility (BSR), Carlyle, Doughty Hanson, Harvard Management Company, KKR, Oak Hill Capital Partners, PwC US, and TPG.

"Reviewing the Tool helped expand our thinking about ESG management and best practices" said J. Taylor Crandall, managing partner of New York City-based Oak Hill Capital Partners. "EDF’s new tool provides clear and helpful guidance on the building blocks necessary for a successful ESG program."

Going forward, EDF will work with San Francisco-based BSR and other industry partners to broadly disseminate the tool across the industry— with the goal of making the measurement and management of environmental, social and governance performance a standard practice for value creation across the private equity sector.

"The private equity sector is giving more and more consideration to ESG issues in the context of their business decisions" said Jane Mendillo, CEO of Harvard Management Company, based in New York City, adding, "If investment performance can be enhanced by good ESG management the entire sector stands to benefit."




Edited by Amanda Ciccatelli

blog comments powered by Disqus

Green Technology Related Articles