Is Big Business Really Turning Green?
By Jim • May 14th, 2008 • Category: Latest Green News
Corporate America and major green groups are starting to build ties as companies see the benefit of getting ahead of a trend toward environmental responsibility.
While partnerships have been emerging case-by-case, environmentalists are starting to ramp up their efforts to target money mangers and investors in an attempt to change how corporations do businesses.
The latest entrant: private equity firms that control billions in company assets.
Kohlberg Kravis Roberts & Co. (KKR), a private equity firm that controls 46 companies, announced a major agreement last week with the Environmental Defense Fund (EDF). Through the deal, EDF will effectively operate as an unpaid consultant, advising KKR on energy consumption, waste output and the carbon emissions of its companies.
“It’s not as if we are trying to resolve an issue,” said Fred Goltz, co-director of KKR’s energy practice. “We’re trying to get ahead of an issue, and potentially set an example in terms of how best to manage, monitor and improve environmental footprints across the portfolio.”
Well before the deal, EDF had already scored what may be its greatest coup in a prior arrangement with KKR. In cooperation with the group, KKR killed plans by TXU — the Dallas electric company the firm was acquiring — to build eight of 11 coal-fired power plants.
The KKR-EDF partnership, proponents say, is an excellent example of the growing influence of the environmental movement over private equity firms and other well-placed investors to influence boardrooms, leading to a broader cultural change by dint of their large stakes in or outright ownership of a multitude of key companies.
“We had a very constructive working relationship with EDF in the context of the TXU transaction,” Goltz said in an interview. “The opportunity to potentially extend the relationship to our broader U.S. portfolio and marry what we consider to be one of our primary skill sets — which is to systemically measure performance financially and within companies — to take that expertise and marry it with EDF’s practical and real environmental expertise. We see that as a real opportunity for our portfolio companies.”
‘We’re still at the beginning‘
Launched in 1976 and still operated by its founders, Kohlberg Kravis Roberts & Co. held equity investments valued at about $86 billion as of the end of last year. Along with TXU, the firm owns a corporate potpourri that includes big retailers like Toys”R”Us and Sealy, the credit card company First Data and the media research giant Nielsen.
KKR enjoys annual revenues of about $185 billion, and the companies in its portfolio employ roughly 825,000 people worldwide. That footprint makes the agreement with EDF so important, people behind the deal say.
“We want to see [the partner companies] become best practice in the industry sectors where we are working,” said Gwen Ruta, EDF’s vice president of corporate partnerships. “The tools and systems and metrics that we develop with KKR, they will become public and they will be able to be adopted by others in the same industry. So we’re looking for sort of broader change.”
The KKR deal marks the first time EDF has partnered closely with a major investment house that directly controls dozens of companies. Previously, the model was one of working directly with individual brand-name companies, such as Wal-Mart Stores Inc., an EDF partner.
There is enough promise in the new model that EDF plans to start approaching more private equity firms soon.
“We’re still at the beginning of the learning curve,” Ruta said, “but we definitely will be.”
Jim is a full time video games journalist/geek, and the recent birth of his son has made him rethink his entire attitude regarding the environment and the future of the planet. Jim is MYG's resident news hound, so if you have a story please drop him an email.
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