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June 15, 2010
KKR Works With Portfolio Companies to Improve Environmental Performance
    by Robert Kropp

Partnering with the Environmental Defense Fund, the private equity firm helps portfolio companies save $160 million in operating costs and eliminate 345,000 tons of CO2 emissions.

During the past two years, an increased focus on sustainability investment in the private equity asset class has led to a number of significant developments. In 2008, the United Nations Principles for Responsible Investment (PRI) launched the Private Equity Work Stream, and in July 2009, the PRI published Responsible Investment in Private Equity: A Guide for Limited Partners.

In February 2009, the
US Private Equity Council (PEC) adopted a set of Guidelines for Responsible Investment, which call on PEC members to consider environmental, social, and corporate governance (ESG) issues in their investment decision-making.

The PEC guidelines also call on its members to “grow and improve the companies in which they invest for long-term sustainability.” Since 2008, one private equity firm—
Kohlberg Kravis Roberts (KKR), which is also a signatory to the PRI—has done just that, partnering with the Environmental Defense Fund (EDF) in a Green Portfolio Program that seeks to improve the financial and environmental performance of KKR's portfolio companies.

Launched with the participation of three portfolio companies, the Program now includes 12, amounting to approximately 20% of the companies in KKR's global private equity portfolio. During 2009, eight portfolio companies took part in the Program, and the results of the first two years of the program were announced this month.

According to KKR, the eight reporting portfolio companies “have saved more than $160 million in operating costs and eliminated more than 345,000 metric tons of CO2 emissions, 1.2 million tons of waste and 8,500 tons of paper use.” Dollar General, a retail chain, avoided $106 million in operating costs and 160,000 metric tons of greenhouse gas (GHG) emissions. Waste efficiency at Dollar General improved by 75%.

Working with KKR and EDF, portfolio companies select one or more of five key environmental performance areas that are material to their business and environmental performance. The key environmental performance areas include GHG emissions, waste, water, forest products, and priority chemicals. The Program partners then identify metrics to measure and manage business and environmental performance, as well as efficiency improvements.

Ken Mehlman, Global Head of Public Affairs at KKR, stated, “Our goal was for KKR portfolio companies to share and implement best practices that improve environmental and business performance. Despite the fact that this is a long-term commitment, today’s news shows that the work between EDF and KKR is already producing results.”


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