Sustainability and Profitability Go Hand-in-Hand, Says Iowa Corn Farmer

Farming is a tough business.  With constantly changing crop prices, difficult to predict and increasingly extreme weather variations, and changing consumer demands, growers don’t have an easy time of it.

Like any business, profitability is the number one priority. And it should be – if you are not profitable, it’s very hard to stay in business.

All the growers I’ve worked with care deeply about their land. In a recent survey of a group of Midwestern farmers, “land stewardship” ranked as their top value.  And sustainability is in a farmers’ best interest since healthy lands plays a huge role in whether farms will be around – and productive – for the next generation. But making agriculture truly sustainable will require investment from farmers.

Here’s the good news: sustainability and profitability can go hand-in-hand. Efficiencies like fertilizer optimization can result in cost savings. And with those savings, growers can invest in new technologies and cover crops, which can help make farms more resilient and increase yields, generating long term economic gain.

tim-richter-saratoga-partnership

Tim Richter, owner of Saratoga Partnership

I asked Tim Richter, owner of a swine and corn farm operation spanning 9,000 acres in northern Iowa and Missouri, to tell me his profitability and sustainability story. Read more

In Its 5th Citizenship Report, KKR Reaches Beyond ESG

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.

Sustainability pioneer and inspiration to many of us at EDF, Ray Anderson frequently talked about his company’s efforts to scale the seven faces of Mount Sustainability and develop a more responsible company along the way. Summiting a mountain is a good analogy for a company’s journey to improve its environmental performance. To succeed you need a plan, commitment, resources, and the ability to change direction if there are obstacles in your path.

In the case of a private equity firm like KKR & Co. L.P. – with over 56 portfolio companies participating in value creation programs linked to its environment, social and governance (ESG) strategy since 2009– the journey is more akin to traversing an entire mountain range, whose contours keep evolving as companies enter and exit their portfolio.

That changing landscape is what’s driven KKR to continue to adapt how it manages ESG challenges and opportunities. KKR’s recently-released 5th annual ESG & Citizenship Report details how these programs have continued to evolve since our initial partnership in 2008.

Our work together helped drive KKR’s Green Portfolio Program which, six years later, has added a cumulative $1.2 billion to its portfolio companies’ bottom lines while avoiding more than 2.3 million metric tons of greenhouse gases and reducing waste by 6.3 million metric tons and water use by 27 million cubic meters, according to results announced last fall.

kkr_logo_13932KKR’s latest report documents the firm’s progress in advancing ongoing efforts, including measuring and improving ESG performance at key portfolio companies, rolling out a publicly available ESG policy across its global private equity staff, contributing its expertise to the Sustainable Accounting Standards Boards’ development of ESG disclosure guidelines, bringing together sustainability professionals and other experts at its first Sustainability Summit last year, and hiring a full-time energy expert and two EDF Climate Corps fellows to help its portfolio companies more systematically adopt solutions for better energy management.

In addition, something new caught our eye. KKR plans to refocus its investment efforts through one of three lenses – responsible investing, solutions investing and impact investing.

  • Responsible investing incorporates ESG metrics and analysis into investment decisions.
  • Solutions investing refers to investments made in companies that have an intentional focus on solving a societal challenge and deliver traditional returns to investors, such as providers of reusable bulk shipping containers, developers of environmentally-responsible office buildings in Korea and microfinance groups increasing access to capital for business owners in rural and semirural India.
  • Impact investing goes beyond the other two, focusing on investments in companies that put environmental and social impacts on par or even ahead of financial impacts. KKR began advising two impact businesses in 2013 by providing technical assistance, helping the companies scale their businesses and secure additional funding. Moving forward, KKR will consider investing in such businesses.

At EDF, we believe that private capital can and must be part of the solution to our biggest environmental challenges. We’re encouraged to see major investors like KKR expand their investment strategy as the next step in this journey and eager to see the environmental and financial results it delivers.

Companies Hail Triple-Bottom-Line Benefits of Cleaner Trucks

Ben and Jerry’s became the latest corporate voice calling for strong fuel-efficiency and greenhouse gas standards for heavy trucks. In a Guardian op-ed, CEO Jostein Solheim made a compelling triple-bottom-line case for protective standards for new trucks.

holycowinc_2265_2844729Mr. Solheim noted that seventeen percent of the company’s carbon footprint is associated with transporting products. This includes bringing ingredients to manufacturing facilities (three percent) and moving the finished products to distribution centers (fourteen percent).

Like packaging, transportation and distribution is a consistent, significant carbon footprint component of every product: six percent of H&M clothes; twenty-five percent of the carbon budget from Mars; and thirty five percent of Philips operations, for example. And, trucks are the largest single component of distribution emissions, accounting for 57% of the collective impact. Therefore, it is in the interest of every product manufacturer and brand in the U.S. to see these trucks use less fuel.

Freight-share-GHGsThe single most impactful thing we can do today to reduce emissions from product distribution is to build more efficient trucks. We have the technical know-how to cost-effectively double the efficiency of freight trucks. We also know that having well-designed standards in place is a necessary step to bringing these solutions to market at scale. Read more

EDF Climate Corps Proves its ROI for Private Equity Firms

As summer officially gets underway, the 2015 EDF Climate Corps fellows are already off to the races seeking out energy and cost-saving opportunities for some of the world’s largest companies and organizations. Among those participating, we are pleased to place 13 fellows with private equity firms and their portfolio companies, the largest such cohort in a single summer, besting last year’s record of 12 fellows. This brings the grand total up to 57 EDF Climate Corps fellows who have worked in the private equity sector (including with portfolio companies) to date.

EDF Climate Corps fellows Yien Huang (left) and Jiamu Lu (right) collaborating at the fellow training

EDF Climate Corps fellows Yien Huang (left) and Jiamu Lu (right) collaborating at the fellow training

Since 2008, EDF has worked with the private equity sector to drive environmental results, beginning with a partnership with KKR & Co. L.P., and later with The Carlyle Group and Oak Hill Capital Partners. Resulting from this work was a suite of free tools designed to help firms identify and manage environment, social and governance (ESG) issues. EDF Climate Corps offers private equity firms a powerful resource that continues to deliver environmental benefits alongside real financial returns.

This year, as in past years, we continue to see a diverse range of participating companies and projects:

  • In 2015, we welcome new hosts Guitar Center, NBTY (vitamin/food supplement supplier), Ortho Clinical Diagnostics (medical equipment manufacturer), Pharmaceutical Product Development, and Gelson's Markets (a grocery chain in southern California).
  • Among returning companies, we’re excited to welcome back Floor & Décor, Philadelphia Energy Solutions, Avaya, and Caesars Entertainment, the last of which was featured in episode 7 of the Showtime series Years of Living Dangerously (now available on Netflix, Hulu and Amazon Prime), which profiled the efforts of EDF Climate Corps.
  • HCA Healthcare will also be returning, marking the company’s sixth straight year of participation.
  • KKR & Co. L.P., Carlyle Group, and Hellman & Friedman will have fellows working at the firm level this year.

The work that these fellows will engage in this summer ranges from energy benchmarking and efficiency upgrades to demand response assessments and green revolving loan fund design. We’ve written previously about the myriad ways that fellows can add value both at private equity firms and portfolio companies and we’re excited to see new stories unfold this summer. Watch this space as well as our Climate Corps-specific blog, where fellows across a variety of sectors will share their experiences and accomplishments.

Investor Ranks Top $1.5 Trillion in Support of National Methane Standards

California public school teachers. Religious charities. New York police officers and firefighters.

investorsWhat do all of these groups have in common? Investors representing them — who manage $1.5 trillion in retirees, current employees’, and others assets – are standing together and calling for strong rules limiting harmful methane emissions from the oil and gas sector. This level of outpouring – from diversified investors with holdings in the oil and gas industry – represents five times the support investors expressed for methane rules last year. A trend is emerging.

The investors, including the largest retirement funds in California and New York, issued a powerful statement in support of the president’s methane proposal aimed at cutting emissions nearly in half in a decade. A centerpiece is regulation of methane, the primary ingredient in natural gas, which has over 80 times the warming power of carbon dioxide in the first 20 years after it’s released and is responsible for 25 percent of the warming we are feeling today.

From their vantage point as long-term stakeholders, the “serious threat” methane poses to climate stability compels them, as fiduciaries, to support action to cut emissions and avoid near term threats to “infrastructure and economic harm that will weaken not only the companies we invest in, but the nation as a whole.” Market pressure like that is difficult to ignore. Read more