Finding Ways that Work in The Carlyle Group’s Investment Process

Fellow: Jennifer Le, 2012 EDF Climate Corps fellow at The Carlyle Group, MBA Candidate at the Samuel Curtis Johnson Graduate School of Management at Cornell University

Organization: The Carlyle Group

Opportunity: The Carlyle Group is a global alternative asset manager with more
than $156 billion in assets under management across 99 funds and 63 fund
of funds vehicles.

In recent years, some private equity firms have implemented processes to boost energy efficiency. Building on their existing programs and partnership with Environmental Defense Fund (EDF), The Carlyle Group (Carlyle) hosted its first EDF Climate Corp fellow to prove the case that energy efficiency makes business sense for real estate investors and can be incorporated into the current private equity investment life-cycle for real estate investments.

During my time at Carlyle, I had the opportunity to work closely with the U.S. Real Estate acquisition and asset management teams. By understanding their current process, I could piggy-back on what is already being done and provide them with the ability to further capitalize on energy efficiency opportunities. I’ve developed a framework and implementation guide that leverages existing vendors and reports to allow investment teams to review potential energy efficiency initiatives and incorporate them into their decision making.

A number of solutions are available for investment firms depending on the deal structure and asset classes. The following are my top three recommendations for enabling a general real estate investor to find the highest return on investment while smoothly integrating energy efficiency considerations into their current investment process:

1. Incorporate an energy analysis into the acquisition process

Benchmark the asset’s historical energy usage and identify those with the highest opportunity for change. Quantify potential operating cost savings and costs of implementation to build into the budget and pro-forma models, when such investments meet fund return objectives. Incorporate energy efficiency strategies into the business plan. 

2. Review the existing investment portfolio

Leverage the growing market of Software as a Service (SaaS) tools or online services to quickly identify and prioritize properties with the highest opportunity for operational improvement that require the lowest initial investment.

3. Utilize current property management procedures

Develop energy performance goals (such as a percent decrease in costs or a specific Energy Star rating) and apply best practices by asset class (property type) across the investment portfolio. Incorporate performance goals and energy data monitoring into the current reporting process to property owners (i.e. quarterly budget and operations reviews).

In 2012, Carlyle has been able to develop an implementation strategy that works for its team and lays the groundwork for the future by tapping into the EDF Climate Corps program.

Carlyle has partnered with EDF Green Returns since 2010 and has developed innovative environmental frameworks that have been applied to new investments to identify NPV positive opportunities. Real estate investors can use EDF Climate Corps to jumpstart their programs across portfolios; EDF fellows can help develop a tailored program within the investment lifecycle that ultimately leads to better operating margins and increased asset values, and greater engagement with investors who value environmental initiatives.

EDF Climate Corps places specially trained MBA and MPA students in companies, cities and universities to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit our Facebook page or follow us on Twitter to get regular updates about this project.