Private Equity Firms Realize the Value of Participating in EDF Climate Corps

Lee Coker | September 17, 2012

In recent weeks, the eight EDF Climate Corps fellows who have been embedded at private equity firms and their portfolio companies began giving their final reports to senior management about their efforts to identify strategic opportunities to increase energy efficiency and returns.

We've been impressed at the level of engagement by top leaders at The Carlyle Group (Carlyle) and Clayton Dubilier & Rice (CD&R) in the work of EDF Climate Corps fellows, as well as the receptivity of portfolio companies to boosting return on investment through energy efficiency opportunities.

Today, we want to highlight the work of three fellows, just to give a taste of the kind of projects this energetic and dynamic group is completing. Their experience demonstrates that EDF Climate Corps can be a powerful tool for jumpstarting or energizing an ESG initiative, whether at a private equity firm or one of its portfolio companies. 

Developing an ESG effort at a leading private equity firm

CD&R had already been working on developing its ESG program when the firm decided to take on Sarah Stern as an EDF Climate Corps fellow, to prioritize efforts in its portfolio of 16 companies. Stern, an MBA candidate at the Tuck School, developed criteria and metrics for prioritization by looking at management receptivity, the importance of sustainability to clients, geographic location and energy use to select seven companies for further investigation.

She then identified key stakeholders, gathered energy data and identified relevant upcoming capital expenditures. Through data analysis she narrowed the field to three companies, developing a business case for individual energy efficiency investment opportunities based on the best financial and environmental return. Sarah also created a tool – “The CD&R Energy Efficiency Playbook” – to help portfolio company facility managers identify and evaluate energy efficiency projects on their own.

Creating Tools and Strategies for Real Estate Investments

At Carlyle, Cornell University MBA candidate Jennifer Le spent the summer developing an approach aimed at enabling the firm to identify and capitalize on opportunities to create positive financial and environmental outcomes for select real estate assets across its portfolio. Jennifer began by reviewing Carlyle's EcoValuScreen approach within its buyout funds and talking with numerous internal and external experts, gaining an understanding of how to translate this approach to real estate due diligence and asset management. She then developed a framework and implementation guide focused on energy efficiency strategies for Carlyle’s real estate-focused acquisition and asset management teams.

The framework includes benchmarking of property energy usage using software tools, quantifying energy opportunities to build into pro-forma financial models, and incorporating strategies into Management Business Plans and Investment Committee Memoranda. In addition, the program addresses how to both establish appropriate energy performance goals and utilize property management partners to implement, monitor and report results of initiatives.

Based on her analysis of real estate portfolio data, she identified opportunities and developed implementation plans for potential outcomes, ranking projects based on financial and environmental return. At her final presentation last month, we were assured Jennifer’s recommendations would be seriously considered by the presence and engagement of several managing directors of the real estate funds as well as a co-founder. You can read her three recommendations for Carlyle's real estate portfolio elsewhere in her blog

Meeting Ambitious Carbon Footprint Goals

Syniverse, a Carlyle portfolio company, develops technology that allows mobile phones to text, interconnecting voice and data systems around the world. With sustainability as an important concern to Syniverse clients, the company set ambitious goals for carbon reduction last fall. Fresh from earning an MS from Columbia University, Kevin Lehman tackled the challenge of identifying specific areas for energy efficiency that would reduce consumption by 20 percent from 2010 levels by 2015. Kevin found ways to potentially exceed these goals in the Tampa-based company's 200,000 square foot data center and office space. He also worked with the marketing and media departments to refine messaging around the existing efficiency of Syniverse operations.

His recommendations included server virtualization, cold air containment strategies and upgrades to the computer room air-conditioning units that could yield a 30 percent energy savings. Additionally, a change to the building's operating schedule presented a no-cost opportunity to create significant savings on cooling and lighting.

The bottom line: EDF Climate Corps is a powerful way to get measureable results for investors, companies and the environment. Stay tuned to see the quantifiable outcomes that the entire EDF Climate Corps program created this summer.