New Private Equity Management Tool Released

The Environmental Defense Fund Releases New Environmental, Social and Governance (ESG) Management Tool for the Private Equity Industry

In December 2012, the Environmental Defense Fund (EDF), in association with leading private equity firms, released a new management tool to measure and evaluate environmental, social and governance (ESG) performance in the private equity sector. ESG is a term used by investors to describe how they evaluate non-financial performance indicators. Growing interest in ESG matters by investors reflects the view that environmental, social, and corporate governance issues can directly affect financial performance.

How was the ESG Management Tool developed?

EDF developed the free tool in partnership with prominent private equity firms including Kohlberg Kravis Roberts & Co. (KKR), The Carlyle Group, and Oak Hill Capital Partners. According to EDF, these partnerships have resulted in $370 million in operating cost savings and a reduction of 820,000 metric tons of CO2 emissions for more than 30 portfolio companies.

What is the ESG Management Tool and how can it help my company?

The ESG management tool is a free Excel file that provides a framework for private equity firms to assess and improve ESG management across 22 best practice areas. For example, users of the tool can evaluate performance in areas such as access to ESG resources, integration of ESG management into the investment process and portfolio company operations, and measure and report results. The broader framework assesses performance across four categories: leadership, management, investment process, and reporting results. The ESG management tool gives users a detailed analysis of the firm’s practices and a menu of strategic initiatives to consider.

What is the outcome from using the ESG Management Tool?

The outputs from the tool can be used in several ways by general partners (GPs), limited partners (LPs), and others, for example:

  1. GPs can use the tool to evaluate their performance and develop a prioritized action plan for improvement
  2. LPs can ask GPs to perform a self-assessment and discuss with them the actions the firm plans to take based on the results
  3. Consultants can use the tool to develop specific recommendations for improvement with their private equity clients.

EDF’s ESG Management Tool is a resource for private equity firms to make measuring and managing ESG performance a standard practice for value creation across their funds.

Where can my company obtain more information?

For additional information on the ESG Management Tool or the ways in which EHS Support can assist Private Equity firms with ESG management, contact Bruce Martin at (703) 944-4709 or bruce.martin@ehs-support.com.

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