Large private equity firms like The Carlyle Group (Carlyle) and KKR have clearly proven the environmental, financial and reputational benefits of undertaking environmental initiatives within their portfolios. Since we started our private equity work in 2008, however, smaller firms have repeatedly questioned whether it is really possible to replicate a similar approach at the majority of private equity firms that manage less capital and invest in smaller companies.
Now, we have the answer: a resounding yes.
Environmental Defense Fund (EDF) and Oak Hill Capital Partners (Oak Hill Capital) worked together to create a methodology that mapped Oak Hill Capital’s portfolio of 20 companies according to environmental impacts, financial opportunities and management readiness. Our goal is to create a model that other private equity firms can use to jumpstart their environmental initiatives by first focusing on the portfolio companies with the largest opportunities. The initial success can then be utilized to build further buy-in and engagement throughout the firm and at additional portfolio companies.
The recently concluded pilot program at Oak Hill Capital identified more than $700,000 in annual energy cost savings and an annual CO2 emissions reduction of 2,900 metric tons at just a small number of facilities of three portfolio companies. The methodology found the biggest impact was likely at Dave & Buster’s, a leading operator of high volume entertainment/dining complexes; Jacobson Companies, the Des Moines, Iowa-based transportation and logistics firm; and ViaWest, one of the largest privately held data center, cloud computing and managed service providers in North America.
Going forward, Oak Hill Capital will share results at its annual CFO conference, expand on the three programs underway and begin working with additional management teams in its portfolio. Already, Oak Hill has used its annual CEO conference, its relationships with various operating consultants and its internal ESG committee, as well as EDF’s Climate Corps program, to further these efforts.
Dow Jones and Wall Street Journal media coverage of this successful collaboration highlights the growing interest that private equity firms and their institutional investors have in seeing firms incorporate this approach.