Carlyle Sheds Light on How Sustainability Creates Value in 2015

This post is part of an EDF+Business ongoing series on sustainable finance, highlighting market mechanisms and strategies that drive environmental performance by engaging private capital. EDF is actively engaging leaders with the capital and expertise needed to catalyze sector-wide changes—from accelerating investment in energy efficiency and clean energy, to protecting tropical forests, restoring depleted fisheries and saving habitats of endangered species.

On the eve of The Carlyle Group releasing its 2015 Corporate Citizenship Report, I had the chance to catch up with Jackie Roberts, Chief Sustainability Officer at Carlyle and former EDF colleague who was one of the founders of EDF’s Corporate Partnership Program. Here are highlights from our conversation:

Jackie RobertsWhat attracted you to your current role at Carlyle?

Rather than being in an arm’s-length advisory role, I now get into more of the details of implementation. I work directly to support sustainability leads in a broad range of companies, helping them prioritize among business goals, crystallize sustainability strategies and, most importantly, execute on a lot of different ideas. Also, as Carlyle is an owner of companies in many countries and industries, I have the opportunity to understand how aspects of sustainability play out differently across the globe. In short, it is a tremendous platform for influencing corporate sustainability.

What are you and Carlyle particularly proud of in this year’s report?

This is the first year that we have designed the report to align with the types of value creation we typically see, such as customer satisfaction, brand equity, operational efficiency and workplace strength. This year’s report moves beyond operational efficiencies into these other key drivers for companies.

What does Carlyle see as the value of ESG management for its business? How do you quantify that value? What form is that taking, both for Carlyle and its portfolio companies?

We have examples across these four ways that ESG management connects to value creation (customer satisfaction, brand equity, operational efficiency and workplace strength). A great example related to both customer satisfaction and brand equity comes from a portfolio company that quantified its sales increase for greener products. Their primary customers, mainly hotels, were requesting green products, so the company invested in this area, which paid off in increased sales – a clear win-win.

What are some of the most pressing environmental issues that Carlyle looks to address, internally and/or in its portfolio companies? How are you addressing them?

The material issues for companies vary widely – ranging from raw materials issues to what ingredients they put into their products or the equipment that they use. One area we have focused in on is equipment. Many companies have underinvested in physical capital — more efficient equipment or vehicles or upgrades to facilities. So, over the last few years, we’ve worked with a number of the companies to develop a strong business spending component. Carlyle is bringing money to upgrade and expand plants, which includes buying the latest and greatest in terms of efficiency. Through this process, we are playing a material role in being a customer for lots of environmental solutions.

How are you thinking about the role of finance in sustainability? What do you expect will change over the next five years?

I think financing of sustainability projects needs to play more of a pull role, not just offering third-party financing but sweetening the offer for companies to make it worth their time to spend on projects. Something like what the federal government did in offering straight grants as part of stimulus funding. At Johnson & Johnson and Adidas Group, with their internal funds for sustainability projects, the plant manager can get additional monies they wouldn’t have had access to for their capital budget, but they also get to keep the savings from the upgrades. We need more of these types of tangible incentives that prompt action.

What kind of response have you received while working with sustainability experts at Carlyle’s portfolio companies?

I have had a great response from individuals in companies responsible for these areas, because they’re looking for additional expertise and ideas. They see Carlyle’s expertise as a value-add, in terms of helping them develop a work plan and think about what they could be doing. I regularly have discussions with many individuals at portfolio companies and they have my phone number and can call me anytime.

As a result, this job’s been a lot of fun: I’ve done everything from helping to write the job description for a full-time sustainability person to providing deep knowledge on a particular area to working with sustainability leads on how to sell efforts internally. The help we offer is about connecting what they can do on sustainability to what their customers want or operational concerns. We’re working with various portfolio companies to find and articulate that value.

For more on Carlyle’s sustainability efforts, we recommend reviewing Carlyle’s 2015 Corporate Citizenship Report. We noted a key theme that runs throughout the report is how Carlyle assesses not only the risks presented by environmental, social and governance management, but also the opportunities. “Increasingly, we also seek to identify opportunities for sustainability to enhance value,” the firm notes. We are pleased that identifying these areas for value creation in part draws on the use of the EcoValuScreen, which Carlyle and EDF created together to highlight prospects for operational enhancements. We look forward to continuing to track Carlyle’s progress on sustainability with Jackie at the helm.

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