Adding a Green Lens to Due Diligence

Using environmental innovation to unlock value

EDF and The Carlyle Group — a global private equity firm with nearly $150 billion in assets under management — developed EcoValuScreen, an innovative due diligence screen that identifies new opportunities for value creation through environmental innovation.

This new due diligence process was developed in partnership with The Payne Firm and builds on Carlyle's established due diligence practices and EDF's proven Green Returns approach.

EcoValuScreen has the potential to transform due diligence practices at Carlyle and set a new standard for the private equity industry by:

• Unlocking economic value by identifying opportunities for value creation through enhanced environmental management prior to acquisition.
• Providing a flexible, broadly applicable approach that can easily be incorporated into established due diligence practices.
• Making it convenient for private equity firms to effectively incorporate environmental management into post-investment management, governance and reporting plans of portfolio companies.

EDF and Carlyle are applying EcoValuScreen to new investments in the U.S. and Europe. In addition, we will continue to refine the due diligence screen and share case studies when available with the mutual goal of sharing lessons learned and best practices throughout the private equity industry.

A flexible approach for any sector

This innovative screen goes beyond the traditional focus on risk mitigation and identifies environmental opportunities to build more valuable portfolios through early-stage identification of operational enhancements. The screen is designed to be flexible and broadly applicable to any industry sector. The brief slideshow below provides an overview of the EcoValuScreen and covers the following topics:

1. Why it matters: Expanding transactional environmental due diligence practices beyond the current focus on risk mitigation will help identify new opportunities for operational improvement and value creation.
2. How we did it: The Carlyle Group, Environmental Defense Fund and The Payne Firm developed a flexible and scalable due diligence screen that enables investment professionals to identify environmental opportunities that improve operations, reduce costs and strengthen market positions of potential portfolio investments.
3. How it works: Investment professionals use the screen to evaluate how environmental management can enhance the value of a new acquisition, inform the bidding process and be incorporated into the post-acquisition management plan.