From the inside-out: Warburg Pincus and EDF Climate Corps’ recipe for replication

Since 2008, EDF has worked with private equity firms to integrate environmental, social and governance (ESG) management into their practices. Leveraging our EDF Climate Corps program is a key strategy for replicating our work and we have now placed 44 EDF Climate Corps fellows among private equity firms and portfolio companies, to date. To learn more about how a particular firm has benefitted, I recently spoke with representatives at Warburg Pincus to hear how the EDF Climate Corps program has enhanced their continued efforts to share ESG-related best practices with Warburg Pincus' portfolio companies.

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This summer, Warburg Pincus hosted an EDF Climate Corps fellow for the second year in a row, and again chose to place the fellow at the firm level, rather than with a single portfolio company. “Running this process from the center allowed us to identify different opportunities, across our portfolio and coordinate work on each of them,” Warburg Pincus Vice President Michael Frain told me.

From speaking further with Frain and Daphne Patterson, Warburg Pincus’ first EDF Climate Corps fellow and newly minted associate, four key themes emerged:

Use consistent metrics when comparing projects. As the EDF Climate Corps fellow surfaced possible projects for energy efficiency or resource management, having a consistent set of metrics made it easy to compare the return on investment of each project based on different conditions. For instance, a given electricity efficiency project might save 6 cents per kilowatt-hour (kWh) in Texas, but 22 cents per kWh in southern California. “Though very simple math, the opportunity to analyze the potential results of specific projects on a regional basis enables us within Warburg to drive a more substantive conversation within both the firm and the portfolio,” Frain said.

Listen to local needs. Patterson found that she brought the most value to portfolio companies when she acted as a student of local conditions and as a resource to assist companies in responding to the concerns they were hearing from various constituencies. “Given the range of opportunities across the 120 companies worldwide with varying profiles, I learned very quickly that one can’t necessarily go in with a toolset that they can immediately plug in and apply,” she said. “There needs to be a genuine process of listening first to what that company is looking for and then building the most appropriate tools in response.”

Michael Reading

Michael Reading

Cross-pollinate. “Our portfolio companies started discussing different perspectives on ESG and the various levers to value; such as saving electricity, and effectively communicating the measures they are implementing to impact sales, hiring and retaining talent. Customers and supply chain companies are looking at ESG issues with increasing frequency,” Frain stated. “Many of our portfolio companies are doing positive things on ESG issues, but don’t necessarily have a communications strategy regarding their efforts and accomplishments.”

As portfolio companies discovered new ways to tell the story of their ESG successes, they have shared wins and strategies, through Warburg Pincus’ quarterly Green Council meetings, through the EDF Climate Corps fellow, or more broadly through their websites. Examples include the crafting of a portfolio company’s first sustainability report, enhancing tracking of ESG metrics, and developing internal “Green Teams.”

Layer success on top of success. As Warburg Pincus deepened its engagement with the EDF Climate Corps program, it saw the benefits multiply: first, bringing on Patterson last summer, then Jan Schwarting this past summer and now hiring Patterson to continue the work on a full-time basis. “We found so much value that we hired our fellow,” Frain says, noting that the work and the value continue to grow.

“Helping our portfolio companies manage risk, improve efficiency, and reduce environmental impact and costs enables us to build more valuable, competitive and sustainable entities,” he says. “That’s our business and ESG is fully aligned with that.”

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