Sustainable Freight: Just the Facts

Freight is an essential part of a globalized, modern economy. It is also responsible for eight percent of all U.S. greenhouse gas emissions. This is significant in itself, but even more concerning is that emissions from freight transportation are also growing. And fast.

The good news is that there are actions we can take today to reduce this growth in freight emissions and actually achieve significant absolute reductions in carbon pollution. These actions can be cost-effective and will enable freight to be moved more efficiently and responsibly.

The sustainable freight infographic below brings to life facts and figures that illustrate the challenge and opportunity freight presents us today. We need both strong new policies and bold corporate leadership to reduce freight emissions.

The most import fact of all that are presented below is this: it is in our power today to choose a future that embraces a strong freight transport sector that also dramatically cuts carbon pollution.

EDF on the road to share strategies for innovative Sustainable Logistics

Freight transportation's contribution to greenhouse gas emissions and carbon fuel consumption is set to rise significantly in the coming decades unless we do something to halt the trend now.

The good news is there's plenty that can be done, simply and effectively, with minimal capital outlay and rapid results. And a lot of companies are already taking advantage of a wide range of operational strategies that improve environmental performance and cut costs.

Our role at Environmental Defense Fund (EDF) is to raise the bar for environmental performance in logistics operations in the private sector. One of the ways we do this is by sharing success stories of leading companies that are choosing cost- and carbon-saving transportation strategies.

Last month EDF held a workshop at the GreenBiz Forum in New York titled "Smarter Moves: Practical Supply Chain Strategies." Jason Mathers was joined by Kristine Young of Ocean Spray and Edgar Blanco of MIT’s Center for Transportation and Logistics to discuss the case study we released in February.

On April 2, 2013 EDF will be participating in another panel discussion with some of our valued partners. This time we’ll be in Newport, RI at the CONECT (Coalition of New England Companies for Trade) Trade & Transportation Conference.

CONECT is a non-profit, membership-based association for businesses involved in international trade and/or transportation.  CONECT's 750+ members consist of importers, exporters, customs brokers & freight forwarders, 3PLs, ports, air/ocean/ground cargo transportation providers, banks, law firms, colleges, insurance companies and other related service providers active in international trade. CONECT’s members represent a range of significant stakeholders in the freight industry so this event is a prime opportunity for EDF to share practical advice on how to reduce carbon emissions throughout the entire freight system.

The “Innovative Sustainable Logistics: Operationalizing Carbon Reductions in Your Supply Chain” panel will feature Peter Diehm of nora, Edgar Blanco of MIT, Cynthia Wilkinson of Staples, Ed Poloway of Ocean Spray and Jason Mathers of EDF. The focus of the panel discussion will be on providing practical examples of how Staples and Ocean Spray have improved the carbon-efficiency of their supply chain.

To learn more about what your company can do today to reduce transportation costs and freight emissions, join us at CONECT’s Trade & Transportation Conference. The conference will be in Newport, RI. If you are able to attend, mention that you heard about the event through this blog from EDF and you will receive the discounted member rate for the conference.

EDF’s private equity work highlighted in Environmental Finance

Last week, Environmental Defense Fund (EDF) was featured in Environmental Finance. The piece centers on results from our work with the private equity sector on environmental initiatives like EDF Climate Corps and our ESG Management Tool. Below are a couple interesting excerpts from the article:

Creating a competitive advantage

When it comes to managing environmental, social and governance issues, the private equity industry is moving from 'why?' to 'how?', say Tom Murray and Lee Coker

Can you hear it? The private equity (PE) drumbeat for responsible investment is growing louder. 

In five years of leading this effort, Environmental Defense Fund (EDF) has seen the conversation shift fundamentally from why PE firms should care about environmental, social and governance (ESG) factors, to how they can leverage ESG management to improve financial performance – while also driving better environmental and social outcomes.

Today, a whopping 92% of fund managers plan to increase their focus on ESG management in the next three to five years, according to research by Malk Sustainability Partners.

And our ongoing conversations with leading firms support the thesis that ESG issues are increasingly becoming top-of-mind, and not just from a theoretical perspective.

Simply put, PE firms are recognizing the importance of ESG assessment and integration throughout the investment process to decrease risk, improve returns and responsibly manage their institutional investors’ money…

Keys to getting started

Another terrific resource for getting started is EDF’s Climate Corps programme, which places specially trained MBA students in companies to develop practical, actionable energy efficiency plans. It is a powerful way to obtain measurable results for investors, companies and the environment. Since 2008, we have placed 20 Climate Corps fellows at 12 different PE-backed portfolio companies. On average, EDF Climate Corps fellows have found $1 million in savings for their hosts with a total of $1.2 billion in identified savings since the programme began four years ago.

PE sponsors have included Apollo, Carlyle, CD&R, General Atlantic, KKR, Oak Hill Capital Partners and TPG. PE firms have also hosted fellows at the firm level, including CD&R, Carlyle Group’s Real Estate Fund and KKR’s Capstone.

 

To read the full article, visit Environmental Finance

ESG Management Takes Center Stage at SuperReturn Berlin

Last week, I attended Europe’s largest private equity event of the year, where 1,400 of the world’s leading private equity sector professionals gathered to discuss the future of the industry, fundraising opportunities and the economic climate.

I spoke at two events: a panel entitled “ESG: Theory vs. Practice – Discerning quality ESG from claims of best practice” and a more informal roundtable discussion on creating value through ESG initiatives, which I was pleased to host. My primary goal was to spread adoption of EDF’s new ESG Management Tool, which defines the building blocks of a successful ESG management program at private equity firms of all sizes.

Four themes of the conference stuck out for me:

1)      ESG management can improve the reputation of the industry. 

Carlyle co-founder David Rubenstein repeatedly mentioned the eroding reputation the private equity sector has experienced over the past several years. When asked how to fix the reputation, he suggested one method is for all GPs to better understand that investors and other stakeholders are interested in more than just financial returns. “They want to hear about the environmental impact of what we do. ESG factors are very important to what we do at Carlyle,” Rubenstein said in his keynote address.

2)      ESG management plays an important role in fundraising.

In an increasingly difficult fundraising environment for GPs, having ESG as a core part of your value creation strategy can assure LPs that the firm is adequately managing risks and identifying opportunities. GPs ignore ESG at their peril, as highlighted by a comment by Dushy Sivanithy, a principal at Pantheon who is a member of their European Investment Committee. “I just met with a GP that stated when he hears ESG his eyes glaze over. We haven’t invested in him in the past and we will not in the future,” Sivanithy remarked during our "ESG: Theory vs. Practice" panel.

3)      ESG management will be increasingly important as natural gas investing spreads worldwide.

Not only is the fracking boom here to stay, but it is quickly going to spread around the globe, as will the related environmental challenges. I learned from William E. Macaulay, chairman and CEO of First Reserve Corp. that China has more shale reserves than we do here in the U.S. This further highlights the importance of EDF’s work in getting the science, policy and best practices for unconventional gas right in the U.S. not only for environmental protection but also the numerous financial risks that exist in shale extraction, as the industry goes global.

4)      ESG management is even more important with continued lower economic growth.

The current economic climate creates an increased need for better risk analysis and operational excellence. Private equity firms are still expected by their LPs to make returns in the 20 percent range, just as they did when interest rates were 5 or 6 percent. With returns across asset classes declining and PE firms still expected to perform as they did pre-crisis, two things will happen. The first is that firms will look to riskier investments and strategies, making improved ESG analysis even more critical in the due diligence process. The second is that operational performance will play a bigger role than ever before in creating value. Firms that can capture the value from ESG initiatives in their portfolio companies by improving ESG performance in areas like energy efficiency, worker productivity and supply chain transparency will outperform their competitors.

My most important take away was that the importance of ESG management is increasingly understood by all the players in the global private equity sector.  It’s not just Europeans anymore but also an increasingly diverse array of global stakeholders that includes GPs, placement agents, insurers and deal professionals that understand the value creation potential of ESG integration.

 

Study Intends To Determine Methane Leakage Associated With A Growing Natural Gas Transportation Sector

The use of natural gas to power our nation’s freight fleet vehicles is a hot topic in these days of rising diesel and falling natural gas prices. There are several reasons to be excited about this opportunity, including operating cost savings, use of a domestic fuel source, and the potential for a reduction in greenhouse gas (GHG) emissions compared to diesel heavy-duty trucks. However, significant concerns remain with the development of new gas supplies, including the threat of fugitive methane emissions from natural gas vehicles and the fuel supply chain.

Methane is the main ingredient in natural gas and a GHG pollutant many times more potent than carbon dioxide (CO2), the principal contributor to man-made climate change. Even small amounts of methane leakage across the natural gas supply chain can undermine the climate benefit of switching to natural gas from other fossil fuels for some period of time.

In a paper published last year, EDF scientists and other leading researchers examined the impact of potential fugitive emissions on the climate benefits of a switch from diesel to natural gas heavy-duty trucks. The study found that, according to the best available data, methane leak rates would need to be below 1% of gas produced in order to ensure that switching from diesel to natural gas produces climate benefits at all points in time. They also found that – using the EPA leakage rate estimates at that time – converting a fleet of heavy duty diesel vehicles to natural gas would result in increased climate warming for more than 250 years before any climate benefits were achieved.

EDF is working with leading researchers and companies in a series of studies designed to better understand and characterize the methane leak rate across the natural gas supply chain. The studies will take direct measurements at various points across the production, gathering and processing, long distance transmission and storage, local distribution, and transportation. The first study, led by researchers at the University of Texas, is measuring emissions from natural gas production. Results will be released in the coming months.

This content was originally published on EDF's Energy Exchange blog.