How investment legend KKR champions environmental innovation

How investment legend KKR champions environmental innovation

Sundrop Farms develops solar-driven technologies for desalination.

Legendary investment firm KKR has prized “eco efficiency” among its portfolio companies for more than eight years. Now, it is encouraging them to look beyond programs to reduce greenhouse gas (GHG) emissions, conserve water and manage waste to initiatives that champion environmental innovation.

The formal expression of that mission is the Green Solutions Platform, which is essentially an expansion of an earlier effort called the Green Portfolio Program. The main difference between the two strategies is that the newer one recognizes efforts for “eco innovation” and “eco solutions” along with the original focus on eco efficiency, according to the program’s director, Elizabeth Seeger.

“We have a responsible investment policy and approach that is universal,” she said. “Eco innovations may not be material for every company in our portfolio. We do think the expanded platform will encourage more participation.” Seeger shaped KKR’s program while working for the Environmental Defense Fund.

First, a recap of what’s already been accomplished. About one-quarter of all KKR companies, 27 in all, participated in the earlier program. (As of this month, KKR had 105 companies in its private equity portfolio.) The 25 organizations that reported detailed results managed cumulative savings of more than $1 billion. Over time, they have avoided 2.3 million in GHG emissions, conserved 27 million cubic meters of water and eliminated 6.3 million tons of waste, according to KKR’s data.

Notes KKR co-founder George Roberts: “Our decision to transition an already successful program was in response to the evolving nature of our companies' needs and abilities. We will continue working with our program partners to find new ways to drive both business and environmental value.” 

Here’s how KKR defines each of the three areas covered under its expanded program, along with exemplars from within its portfolio:

Eco-Efficiency: Projects that focus on reducing costs and environment impact. One good illustration comes from payment processing company First Data, which owns a massive network of data centers. First Data has avoided 122,000 metric tons in GHG emissions since 2009, saving $17.1 million in the process.

Eco-Innovation: Efforts that create business value through an environmental focus. KKR highlights Gardner Denver Dash, an industrial equipment company that enables other manufacturers to realize energy savings and water reductions. One example: Its latest centrifugal blowers for refineries, wastewater treatment facilities and chemical plants are 8 percent more energy efficient than comparable systems.

Eco-Solutions: Investments in companies that address an environmental challenge. There are two current examples here. The first, Sundrop Farms, sells systems that use solar technology to power farms and desalinate water for irrigation. The second, CITIC Environtech, has built more than 100 facilities using advanced bioreactor technology for wastewater treatment — including the biggest such plant in China.

Notable achievements from well-known companies

KKR’s interests don’t lie solely with startups. If you sift through the 20 or so case studies on its program site, you’ll find results for some pretty big-name companies. Here are highlights for three of them, all demonstrating the program’s original “eco efficiency” focus:

GoDaddy: The biggest priority for the Internet hosting company was reducing energy consumption and related GHG emissions. Accordingly, its global technology center relies on a 50-kilowatt solar array for power during daytime hours, while its primary data center benefits from investments in high-efficiency chillers. The latter measure helped saved more than 35 percent in energy costs related to heating, ventilation and air-conditioning (HVAC) systems.

HCA: The healthcare organization has saved an estimated $10.6 million since 2012, by automating the energy management systems at its hospitals and surgical centers and collecting data about operations. Its efficiency has improved by 4 percent per square foot.

Toys “R” Us: One of the toy maker’s most effective programs has been replacing lights in its warehouses and stores. Last year, it swapped out 8,000 halogen bulbs for power-sipping LED bulbs at its Babies “R” Us stores. Toys “R” Us also uses scheduling technology at its New Jersey headquarters, which reduces lighting usage by an average of two hours.