Four years ago, as EDF was building up our Green Returns project, I landed a meeting with a leading private equity firm to discuss sustainability and possibly participating in our new initiatives. On the train into Manhattan, I looked up the firm's website on my smart phone to find the exact address for our meeting. But as was often the case in those days, there was no phone number and no address on the site — little more than the firm's name and logo. The message was, if you don't know how to contact us, we don't need to hear from you.
Contrast that experience with the changing state of transparency in private equity. Today, firms routinely list their portfolio companies, disclose total assets under management, post staff bios on their websites, and are beginning to report on their environmental, social and governance (ESG) activities.
The sustainability section of TPG's website is the latest example of growing ESG transparency in private equity. The multi-page sustainability section lays out the firm's approach and goals, and highlights case studies, including:
- Caesars Entertainment's energy efficient facilities and waste management initiative, which resulted in more than $17 million in annual run-rate savings across 110 projects, or a 163 million kilowatt-hour annual reduction in energy usage.
- Avaya's redesign of ten product families in order to reduce the material and logistics footprint. Results included reduction in use of 6.3M ft2 fiber board, keeping 15.5 tons/188,000 ft3 of foam out of landfills and removing 3900 wooden pallets from the system; 19 percent drop in ocean or truck containers required and reduced fuel consumption by 17,800 gallons; and reduction in emissions over 210 tons of CO2.
- Hilex Poly's Bag-2-Bag® in-store recycling program takes used plastic bags from 30,000 collection bins for reprocessing, representing 120 million pounds of post-consumer annual capacity.
I recently checked out the site and watched the sustainability video – “Results for the Present, Preparation for the Future” — that includes interviews with portfolio company chief executives about the importance of sustainability to creating value and saving money in their businesses.
"We started with sustainability as a built on," said David Scheible, president and CEO of Graphic Packaging. "It didn't really work. We did not make much progress. We realized that sustainability had to be something that we did across our business."
Harrah's CEO Gary Loveman spoke about the importance of scorecards and mechanisms for transparently comparing sustainability results across different business lines, and how the company found it relatively easy to stimulate extraordinary innovations in waste management and energy efficiency.
The video also features Carter Roberts, president and chief executive of the World Wildlife Fund, and Jonathan Lash, former president of the World Resources Institute, speaking about the competitive advantage enjoyed by corporations that make sustainability a priority.
"Long-term trends are going to require us to change," Lash said. "This is not about doing the right thing. This is about preparing for tomorrow's markets in order to succeed rather than be left behind."
As we've demonstrated through our projects and documented on this blog, the biggest asset managers in the world are now talking about sustainability, consider it a priority, and are increasingly transparent about their views and practices. The four largest private equity firms –Blackstone, Carlyle, KKR and TPG — are actively engaged on these issues. Combined they have raised over $172 billion in the last 10 years (according to Preqin) and represent a substantial force when it comes to shifting the conversation.
This growing focus on sustainability and responsible investing reflects the dramatic change we've seen in stakeholder expectations, the economy and how institutional investors define value creation.