KKR Expands Its Green Portfolio by Shepherding Green Solutions

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.


We’re proud to see the Green Portfolio Program, an initiative we helped kickstart in 2008 with private equity firm Kravis Kohlberg & Roberts (KKR), evolve to identify and implement more efficient practices in its portfolio companies that drive business value and reduce environmental impacts. Last week, KKR relaunched this initiative as the Green Solutions Platform (GSP), expanding its mission to include companies outside of its private equity portfolio, as well as a wider range of business and environmental benefits.

kkr_logo_13932KKR announced a shift in its investment strategy in its latest ESG report, and the relaunch of the GSP gives us a first glimpse into what that means in practice. The GSP’s scope has expanded beyond finding energy, water and waste reductions – what KKR refers to as “eco-efficiency projects” – to include portfolio company projects that can drive both top-line and environmental gains (“eco-innovation”) and companies whose core business drives a positive environmental impact (“eco-solutions”).

Much like GE with its Ecomagination product line or social enterprises focused on delivering renewable energy or clean water, the GSP’s new direction has the potential to support business activity that, by its nature, curbs climate impacts and creates value for communities and companies alike.

In just eight short years, 27 KKR portfolio companies reported that they achieved nearly $1.2 billion in avoided costs and added revenue, and avoided more than 2.3 million metric tons of greenhouse gas emissions, 27 million cubic meters of water use, and 6.3 million tons of waste through eco-efficiency efforts. We’re heartened to see an already-forward looking firm push its boundaries further in the pursuit of greater environmental gains, and look forward to seeing what innovations emerge from the Green Solutions Platform.

A strong climate deal makes dollars and sense for American business

VictoriaMills_287x377_1The chorus of business voices calling for climate action has grown steadily in size and strength in the months leading up to the Paris climate talks. Now that COP 21 is finally here, companies have pumped up the volume even more, with a full-page ad in the Wall Street Journal and a wave of new commitments to the American Business Act on Climate Pledge.

Championing a Low-Carbon USA

In today’s Wall Street Journal, over a hundred U.S. companies placed a full-page advertisement calling for a shift to a low-carbon economy. The ad’s message is simple: failure to act on climate change puts America’s prosperity at risk, but the right action now will create jobs and boost competitiveness.

WSJ-ad

Click for full ad in PDF

Companies as diverse as Colgate-Palmolive, DuPont, eBay, General Mills, Ingersoll-Rand, Microsoft, Owens Corning and Pacific Gas & Electric signed on to the ad, which encourages the U.S. government to:

  1. Seek a strong and fair global climate deal in Paris that provides long-term direction and periodic strengthening to keep global temperature rise below 2°C
  2. Support action to reduce U.S. emissions that achieves or exceeds national commitments and increases ambition in the future
  3. Support investment in a low-carbon economy at home and abroad, giving industry clarity and boosting the confidence of investors

These companies recognize that their efforts alone can’t solve an issue like climate change. Businesses need governments around the world to act as well. By setting ambitious goals and providing regulatory certainty, governments can unleash the power of the marketplace to deliver the necessary reductions in emissions, while also boosting competitiveness and economic growth.

Walking the Talk with the White House

This week, the White House announced that another 73 companies – including Amazon, Cisco Systems, Genentech, News Corp., Rio Tinto and United Technologies – have signed on to the American Business Act on Climate Pledge. By signing the pledge, businesses not only declare their support for a strong outcome in Paris, but also commit to cut greenhouse gas emissions in their own operations. With this third wave of pledges, 154 companies are saying that a low-carbon economy is good for business. These companies have operations in all 50 states, employ nearly 11 million people, represent more than $4.2 trillion in annual revenue and have a combined market capitalization of over $7 trillion.

Aiming High for Best Results

One final point about goal-setting: ambitious goals drive superior results. Just ask Walmart. The retailer recently surpassed its goal of reducing its global greenhouse gas emissions by 20 million metric tons by 2015, reducing them instead by 28 million metric tons. The company achieved these reductions through a wide range of initiatives, from improving energy efficiency to greening its fleet to working with EDF to cut fertilizer use across 20 million acres of farmland. If you had asked Walmart ten years ago how it was going to deliver the 20 million metric tons, it’s unlikely they could have told you. But having an ambitious goal sealed their commitment and unleashed the creativity needed to get it done – and then some.

And that's exactly the message our negotiators in Paris need to hear: set the targets needed to stabilize the climate, and let business innovate to meet them. Whatever the outcome of COP 21, the leadership these companies have demonstrated through their public commitments to address climate change will be even more important after the delegates come home and it’s time to turn talk into action. We look forward to seeing that leadership continue in the months and years ahead.

Innovations in Sustainable Finance: The View From SOCAP15

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.


SOCAP logoI recently returned from SOCAP15, an annual conference “at the intersection of money + meaning”… in other words, a good place to be if you’re interested in how to harness markets to deliver financial, as well as social and environmental, returns. A record 2,600 attendees turned up this year, evidence of the growing interest in sustainable finance.

The increased focus on this space has triggered a wave of innovations aimed at addressing some of the sector’s key challenges, such as building and supporting a pipeline of investible entrepreneurs, securing sufficient demand from investors, and linking those players so that capital can flow efficiently to provide the greatest impact. It’s a challenging road ahead, but the conference offered important proof points that help show the way forward.

Growing support for entrepreneurs

Now is a very good time to be a social or environmental entrepreneur. We are witnessing a growing array of resources, services, and incubator and accelerator programs aimed at kick-starting ventures and preparing them for investment. One exciting example: Agora Partnerships hosted 20+ “deal rooms” at this year’s conference, offering Latin American-based entrepreneurs who had completed Agora’s intensive six-month accelerator program the chance to pitch to interested investors. Last year, these deal rooms resulted in eight investments, ranging from $50,000 to $500,000. EDF is in the early stages of engaging with Agora as we look to scale our sustainable fisheries finance work in Latin America.

Increasing demand from investors

Investor demand is rising to meet the growing supply of social and environmental ventures. A recent survey by US SIF – The Forum for Sustainable and Responsible Investment shows that U.S.-based sustainable, responsible and impact investing assets grew 76% from 2012 to 2014. Another driver of demand is the growing trend of big banks, such as Citi, Goldman Sachs, and Bank of America, committing to increased investment in environmental innovation.

The demand extends beyond banks and institutional investors – to individuals, foundations, and companies, all of which have roles to play. During a panel discussion, Sasha Dichter, Chief Innovation Officer of Acumen Fund, an international nonprofit venture fund, noted a recent shift in how companies invest in their supply chains to build more sustainable businesses: moving from funding initiatives to becoming more deeply engaged, strategic partners. He cited the example of Acumen’s partnership with Unilever and Clinton Giustra Enterprise Partnership, which will improve the livelihoods of up to 300,000 smallholder farmers globally by investing in enterprises to support farmers and incorporate them into Unilever’s global supply chains. Read more

Forum Shows Government and Business Can Work Together to Tackle Oil & Gas Methane Emissions

powering-the-economyThere is often staunch disagreement between industry and policymakers on how to address pollution. But an event last week convening business leaders, federal and state officials and other stakeholders showed that there’s at least one idea on which they can agree and work together: the feasibility of reducing methane emissions from the oil and gas sector.

Here are four perspectives shared at this event that give me hope we can solve the large, but addressable problem of methane pollution from the oil and gas industry if we take a fact-based, collaborative approach. That would be great news in itself, and powerful precedent for tackling the broader climate opportunities ahead.

Environmental regulations are not a zero sum game. Martha Rudolph, director of Environmental Programs at the Colorado Department of Public Health and Environment, was on the front lines when Colorado proposed the nation’s first direct regulation of methane pollution from the oil and gas industry. At the event, she shared her state’s powerful example of unlikely allies coming together to protect climate and communities in a way that makes business sense.

Instead of tales of industry resistance, she shared a history of business and other stakeholders coming together with state policy makers to formulate and implement cost-effective regulations that will cut 100,000 tons of methane emissions – the climate equivalent of taking over 1.8 million cars off the road. Rudolph reports that the rules have not been challenged in court, and to date, her office had not heard complaints about compliance being difficult or costly . Noble, Anadarko, and Encana supported strong rules at the front end, and even the industry trade associations have rolled up their sleeves and set up trainings to ease rule implementation. Read more

Corporate America Steps Up During Climate Week

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The combination of the Pope’s visit, Climate Week NYC and news of China planning a national cap and trade program has made last week huge in terms of support for climate action. But it’s also been a week of great sustainability news coming out of corporate America, and I’m excited to see the momentum building.

  • Companies publicly stating aggressive, science-based sustainability goals? Check.
  • Big brands supporting the Clean Power Plan? Check.
  • Business committing to set an internal price on carbon? Check.
  • Increasing commitment to sourcing 100% of energy from renewables? Check.

Like I said, it’s been a really good week. After 18 years as a sustainability advocate, I’m encouraged to see companies continuing to step up their leadership on climate— making public, science-based commitments and increasingly creating an environment where denial and delay by private and public sector leaders is no longer acceptable. Many of the companies who have made commitments, (this week, before this week, and hopefully leading into COP21), are demonstrating that tending one’s own sustainability garden is necessary but no longer sufficient—corporate leaders of today and tomorrow need to collaborate with each other for greater impact and assert public policy leadership as well. Read more

Faith-Based Investors Call on Exxon, Valero and Others to Support Methane Regulations

Since the president announced in January a national goal of reducing methane emissions from the oil and gas industry nearly in half by 2025, an outpouring of voices has supported the move. Now, EPA has proposed rules to help meet that target, and we’ve seen another wave of support – everyone from editorial boards in the heart of oil and gas country to massive investors like California’s pension funds has recognized that the rules are a manageable, commonsense means for reducing methane pollution.

ICCR-logoThe one voice that’s been silent? The companies with the opportunity to adopt the proven, cost-effective technologies and services to not only reduce pollution but also prevent the waste of the very energy resource they’re producing. Now another voice has emerged to make the case directly to these companies that it’s worth constructively engaging in the rulemaking process: the Interfaith Center on Corporate Responsibility (ICCR), a group of shareholders dedicated to promoting environmentally and socially responsible corporate practices.

Several shareholders from ICCR’s coalition sent letters today to dozens of energy companies in which they invest, voicing their concern about the impact of methane emissions on the climate and public health. As You Sow, BCAM, Mercy Investments, Miller Howard, the Sisters of St. Francis of Philadelphia, Trillium Asset Management, and others made their case to companies whose shares they own, including some of the biggest names in the business, like Chesapeake Energy, ConocoPhillips, Exxon, Kinder Morgan, and Valero.

Specifically, the investors asked the companies to file public comments on EPA’s proposed methane rules, sharing the companies’ data and experience with methane monitoring and management and providing perspective on how the methane rules can be designed to reduce emissions cost effectively. They also urged the companies to guide their powerful trade associations –which have been some of the most vocal opponents of the rules – to engage honestly and transparently in the rulemaking process. Read more

Want Climate Action? Time to Pick Up Your Megaphones

victoriaExperts are saying 2015 may turn out to be the hottest year on record. But thankfully, as my colleague Tom Murray predicted earlier this year, 2015 is also shaping up to be a year for action – by businesses and governments alike – to bend the curve on the emissions that cause climate change.

This year, the Obama administration introduced important new regulations to cut GHG emissions from the electric power, oil and gas and transportation sectors. And businesses are standing behind them. Investors representing $1.5 trillion in managed assets supported federal limits on methane emissions. PepsiCo, Ben & Jerry’s and other companies called for stronger fuel economy and emissions standards for heavy-duty trucks. And 365 companies and investors wrote to state governors urging timely implementation of the Clean Power Plan, our nation’s first-ever limits on carbon pollution from existing power plants.

four-people-speaking-megaphonesA watershed moment for climate action is approaching in December, when the United States and other nations gather in Paris for the COP21 climate negotiations. A strong agreement in Paris could put the world on a path towards greenhouse gas reductions that science tells us are necessary for a stable climate. Business leadership will be critical, both to embolden the negotiators to reach a strong deal, and to ensure that the U.S. delivers on the commitments made in Paris.

Amplifying business support for climate action

Right now, there is a wealth of opportunities for businesses to voice their support for a strong outcome in Paris, and showcase their own efforts to cut climate pollution. The World Wildlife Fund (WWF) and the Carbon Disclosure Project (CDP) recently organized a webinar to present those opportunities and clarify how companies can get involved. Read more

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

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

Bringing The Pope’s Climate Encyclical to Life, a Church at a Time

Last week’s papal encyclical on climate change galvanized those of us who already see responsible stewardship for the earth as both a moral mandate and business imperative. In the 184-page document, Pope Francis calls for a sweeping overhaul of political, economic and individual practices to halt the degradation of the environment and protect our planet for the long term.

The pope's sweeping vision is sure to prompt churches, people of faith and a whole range of organizations to rethink their actions with regard to use of energy, water and other natural resources. But already, religious organizations have been working quietly and steadily to effectively manage their environmental impact, in keeping with the established theological tradition of moral economic development and use of resources.

(Credit: Sacred Heart)

(Credit: Sacred Heart)

Take Gene Murphy of Prescott, Ariz., as a prime example of someone sitting at the intersection of religion, sustainability and business. As the business manager for the Sacred Heart Parish in the Diocese of Phoenix, Gene has developed scalable solutions for his church and school that could and should be replicated across all churches, schools and relevant organizations.

The church performed a clean energy retrofit covering lighting, windows, waste and solar power that dramatically reduced their utility spending from $94,500 a year to $37,000, or $157 in daily savings and transformed the 32,000 square foot school into a near net-zero building. The solar project alone reduces more than 230,000 lbs of CO₂ per year, and the building is now lit with 97 percent LED lights. Gene is already drafting a template for similar organizations to use in analyzing their opportunities in light of new technologies, regulations and methodologies.

At EDF, we see Gene and the Sacred Heart Parish as a real-life example of the kind of pragmatic stewardship the pope is calling for, and we got on the phone with him to get some deeper insights into the parish's transformation. Read more