Blackstone's Solar Program Demonstrates Power of Network Effect

Our hat's off to Blackstone, which recently announced a new solar program. This development has the potential to cut energy costs by 10 percent and improve environmental performance across all the firm's real estate assets and portfolio companies, which have aggregate revenues of $116 billion.

Smart Energy Capital will oversee installation of rooftop solar panels and systems at Blackstone portfolio companies. Third-party investors will own, operate and maintain the panels, which will provide low-cost solar power to portfolio companies via long-term energy purchase agreements.

We've written before about the importance of building internal ESG management capacity, and highlighted the growing number of private equity firms doing just that.  Blackstone spotted this opportunity because of the expertise of Don Anderson, the firm’s chief sustainability officer, and there’s no doubt that this deal will help provide a very attractive ROI.  Just as joint purchasing and centralized insurance negotiations cut costs for portfolio companies, so do these kind of solutions that benefit portfolio companies, investors and the environment.

What’s most exciting about this program is the demonstration of the network effect that private equity firms can create by sharing tools and resources that can cut across numerous portfolio companies in different geographic areas, industries and sectors to achieve similar cost savings and environmental returns. This project is an excellent example of two best practices identified by our recently released ESG Management Tool with regard to internal expertise and network.

The free Excel-based tool defines for the first time the practices necessary to build a successful ESG management program and a framework to assess, analyze and improve ESG management at private equity firms of all sizes.  We believe that use of the Tool will lead to more cutting-edge environmental programs like Blackstone's solar effort across the private equity sector.