The Carlyle Group Goes Green

In a move to clean up private equity’s image (and save a little money in the process), The Carlyle Group has followed in KKR’s footsteps by partnering with the Environmental Defense Fund. But while KKR’s partnership served to “green up” a small handful of its existing portfolio companies, Carlyle has gone even greener. (And right around St. Patty’s Day! They’re related, right?)

The mega-buyout firm, in partnership with the Environmental Defense Fund, will implement something called “Eco ValueScreen.” It’s a due diligence process that identifies places for improvement as well as that holy grail of “value creation” in acquisition targets, all with the purpose of reducing a company’s environmental impact.

The screen was developed by Carlyle and EDF alongside environmental consulting firm The Payne Firm. The firms haven’t estimated any exact savings figure for Carlyle, but the idea is that the screen goes beyond basic risk mitigation in the diligence process Further, other buyout firms will be able to implement the screen for their own diligence processes.

Andrew Marino, a principal at Carlyle, said the firm believes the process will eventually be adopted as best practices in the industry.

Carlyle plans to use it in diligence on targets for its U.S. and European buyout funds with the goal of increasing returns and the positive side effect of decreasing the environmental impact at its companies.

After applying the screen, Carlyle won’t base its investment decision on whether or not a company is already “green.” If a company is has a lot of areas for green improvement, Carlyle Group will bake those improvements into its model. “But if a company is already doing this, they probably have a better management team, and so we’d be interested in the company for that reason as well,” Marino said.

The Payne Firm and Environmental Defense Fund partnered with Carlyle in the deal, so no fees were paid to develop the process. The Payne Firm has worked with private equity clients including Apax Partners, Bain Capital, THL Partners, Catterton Partners and Gores Group.

More information about how the screen was developed can be found here.