Impressive new results of KKR’s Green Portfolio Program provide important insights for the private equity sector

Today KKR announced the fourth year of results from its Green Portfolio Program (GPP), with portfolio companies saving a whopping $644 million and avoiding more than 1.2 million metric tons of greenhouse gas emissions, 3.4 million tons of waste, and 13.2 million cubic meters of water.

We know it has taken a significant amount of hard work from portfolio companies, KKR and external partners to continue to build these impressive results since the GPP began in 2008.

However, these results were created by more than just hard work; KKR’s strategic approach to ESG management ensures that they continue to capitalize on new opportunities in a changing environment. As a partner helping to build this approach at KKR, we drew on our work together to develop Environmental Defense Fund’s (EDF) new ESG Management Tool.  I’d like to highlight a few of the practices from the tool that are clearly leading to these strong results at KKR.

Emphasizing the Firm’s Commitment:  Both George Roberts and Henry Kravis have provided clear public statements that highlight the firm’s ongoing commitment to integrating ESG considerations into firm practices.

Leveraging Expertise:  In addition to the expertise of many KKR staff that help drive results, they have also built an impressive list of external partners in addition to EDF, including BSR, Transparency International, American Heart Association and CSR Europe.  These internal and external experts combine to provide the tools and resources that portfolio companies need to identify opportunities and create results.

Building a Network: In today’s announcement KKR’s Ken Mehlman states that their next step is to share best practices across their entire portfolio.  The early 2013 launch of KKR’s best practices handbook, will share lessons learned at some portfolio companies with others to help them identify and implement projects that improve environmental and financial performance.  This highlights a huge advantage we’ve always seen in private equity: the ability to share tools and resources developed at one company with many others.

Reporting with rigorous metrics: You can’t change what you don’t measure.  With that in mind, the GPP has ensured that environmental metrics are sound and accurately track progress for KKR’s investors and stakeholders to judge for themselves.

The GPP began modestly with just three companies and now encompasses 24 KKR portfolio companies globally.  Today’s results continue to prove to institutional investors that reducing environmental impacts does provide stronger rates of return.

The solutions KKR has developed will continue to spread throughout its portfolio companies — and indeed, to other private equity firms and asset managers.  The bottom line results are too compelling to justify inaction.

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