The success of KKR’s Green Portfolio Program demonstrates an important shift in thinking on the part of private equity fund managers
San Diego, CA (PRWEB) December 21, 2011
Private equity funds are an unusual type of asset management. Private equity funds often own large portions of privately held companies, amounting to hundreds of billions of dollars in aggregate value. As a result, managers of these funds can have a great deal of input in how companies are governed as well as how business processes are managed. This capacity can be used to streamline business processes, enhance access to markets, or refine a portfolio company’s values. In the case of Kohlberg Kravis Roberts & Co. L.P. (‘KKR’), one of the largest private equity fund managers, the interests of investors and portfolio company management have aligned to create value while supporting a more environmentally sustainable world.
On Wednesday of this week, KKR published the third year of results for its Green Portfolio Program. The initiative, developed in partnership with the Environmental Defense Fund, is focused on leveraging environmental innovation to reduce costs and enhance value while protecting our planet. Since its launch in 2008, the Green Portfolio has generated roughly $365 million in operating cost savings for KKR portfolio companies while avoiding 2.6 million of tons of waste and the carbon emissions equivalent of almost 91 million gallons of gasoline.
“The success of KKR’s Green Portfolio Program demonstrates an important shift in thinking on the part of private equity fund managers,” noted Andrew Malk of Malk Sustainability Partners, a management consultancy which develops environmental sustainability programs for financial services companies, “we’re moving from environmental issues as a compliance concern to sustainability as a platform for value creation.”
Specific results within the Green Portfolio include Dollar General, which avoided a total of $235 million in costs by improving the energy and resource efficiency of its stores and facilities while also optimizing its distribution fleet. In all, the published 2011 results cover 13 companies, a dramatic increase from the initial four companies of the program’s first year. The past year also saw several companies from outside the United States join the Green Portfolio.
“We are encouraged by the enthusiasm which our portfolio companies have shown for the Green Portfolio Program,” said Elizabeth Seeger, who helps to head the initiative for KKR, “they see this as a way in which owners and management can collaborate to create shared value.”
“The flow of capital has tremendous potential to move the needle on sustainability,” continued Malk, “but there needs to be a business case which aligns financial interests with environmental ones. The KKR Green Portfolio experience is a big step in the right direction, one which other private equity fund managers and the broader financial community should keep a close eye on and consider emulating.”
About Malk Sustainability Partners
Malk Sustainability Partners (MSP) is a management consultancy which guides forward-thinking businesses around the world to profit from operating in better balance with the environment. With offices in the San Diego, California and Jakarta, Indonesia, MSP works with executives to design and deliver sustainability strategies that generate value and drive competitive advantage. For additional information, please visit MSP's website at http://www.malksp.com.
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