(Washington, DC – March 18, 2010) The Carlyle Group (Carlyle) and Environmental Defense Fund (EDF) today announced the creation of EcoValuScreen, a pioneering business review process that unlocks opportunities for operational improvement and value creation through enhanced environmental management at potential investments. The new analytic tool was developed in partnership with The Payne Firm (Payne), an international environmental consultancy, and builds on Carlyle’s established due diligence practices and EDF’s proven Green Returns approach.
EcoValuScreen goes beyond the traditional focus of risk mitigation during the due diligence process by identifying opportunities for operational enhancements that will lead to better environmental and financial performance before making an investment. This process will be used by Carlyle professionals to more effectively evaluate the operations of a target company, identify the most promising environmental management opportunities and incorporate them into the post-investment management, governance and reporting plans of Carlyle’s portfolio companies. Carlyle will first implement EcoValuScreen in its U.S. and European buyout funds.
“Our goal is to increase returns for our investors while enhancing environmental performance,” said William E. Conway, Jr., Managing Director and Co-Founder of The Carlyle Group. “We believe that financial performance and environmental improvements are complementary and in the best interests of our investors. This builds on our earlier work to develop and implement principles for responsible investing and establishes a new best practice for private equity investments. We are pleased to partner with EDF and we continue to explore other opportunities for collaboration.”
“This is a first for the private equity sector. In an industry where environmental due diligence has been limited to the downsides of liability and risk mitigation, we now have a way to systematically uncover the upside of real opportunities to enhance business performance while improving environmental performance,” said Gwen Ruta, Vice President, Corporate Partnerships, EDF. “Together with our Green Returns framework for improving environmental performance of assets already under management, this new due diligence screen expands the significant role that environmental management can have in creating value in private equity and across the many industries and companies it touches.”
To develop the screen, Carlyle, Payne and EDF examined more than 320 current and former Carlyle portfolio companies to identify opportunities to improve efficiency, reduce costs and minimize environmental impacts across five key areas – greenhouse gas emissions, waste management, water use, priority chemicals and forest products. The analysis revealed a high correlation between environmental impacts and common business activities that occur across Carlyle’s investments. The analysis also identified specific initiatives to enhance the environmental performance of these activities while driving financial savings. The new due diligence screen is designed to be flexible, broadly applicable and easily incorporated into Carlyle’s established due diligence practices.
To validate and improve this concept, Carlyle will apply the new screen and work with EDF to make refinements as necessary. Additional information about the screen is available at http://edf.org/duediligence, and case studies of its use will be made public when available, with the mutual goal of sharing lessons learned and best practices throughout the industry.