Too often, environmental performance gets labeled as the responsibility of one team within a company – whether that of a dedicated sustainability staff, external or public affairs, legal or compliance, etc. As a result, a company’s staff can often think of environmental and social governance (ESG) issues as what Douglas Adams once famously termed an SEP – Somebody Else’s Problem.
With the release of its 2013 ESG and Citizenship Report, private equity firm Kravis Kohlberg & Roberts (KKR) shows it’s taking a different approach: KKR has adopted a new global policy that makes identifying and addressing ESG risks in both the pre-investment and investment phases, for its staff, everyone’s problem.
Notably, KKR’s private equity investment professionals are being integrated into the ESG risk assessment process: first, in assessing risks during the diligence phase, and second, working with portfolio companies, consultants and subject matter experts to set performance goals and measure against them during the typical five to seven years a company remains part of its portfolio.
KKR’s latest report also outlines how the firm is starting to apply its principles of responsible investment to other sectors, including real estate, energy and infrastructure, taking factors into account like current and future water availability, waste disposal, greenhouse gas emissions, energy conservation and other environmental concerns as they assess investment opportunities. KKR mentions in the report how it is developing sector-specific guides for its staff that encompass a broader set of ESG concerns beyond energy or water efficiency, including climate change impacts.
Integrating these methods across KKR’s organization builds on the progress of its Green Portfolio Program, the result of a partnership between KKR and EDF. Since 2008, the program has helped KKR’s 19 reporting portfolio companies achieve more than $917 million in cost savings and added revenue, while avoiding 1.8 million metric tons of greenhouse gas emissions, 4.7 million tons of waste, and 19.5 million cubic meters of water use.
The goal of initiatives like KKR’s new policy and the Green Portfolio Program isn’t just to achieve short-term reductions; they’re also aimed at changing the culture of companies, demonstrating the ability to square financial and environmental performance.
Reducing our impacts on the planet is everyone’s problem, and KKR is leading the way in demonstrating the importance of everyone being part of the solution.
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