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Kohlberg Kravis Roberts and Environmental Defense Fund partner for “Green Portfolio”

By John Decker

May 2, 2008 at 2:18pm

Earlier this year, the Clorox Company teamed up with the Sierra Club to push a new ‘green’ line of cleaners. Now, Kohlberg Kravis Roberts & Co is partnering with the Environmental Defense Fund to find ways to boost profits - and, also, the environment.

As part of the “Green Portfolio” partnership, the private-equity powerhouse will work with the nonprofit advocacy group to create tools to measure and improve environmental performance. After a three-to-six-month pilot project, the team will share findings on how companies can reduce waste, as well as greenhouse gas emissions, toxic substances, waste generation and water consumption, according to the press release.

In an unusual twist, KKR and Environmental Defense will publicize those results, and “make the processes, tools and results of their joint effort publicly available, with the mutual goal of having these tools implemented by other companies around the world.”

The two organizations are expanding a relationship originally forged during negotiations leading to KKR’s takeover of the TXU Corporation in 2007. At the time, the Environmental Defense Fund and the National Resource Defense Council were opposed to TXU’s plans to build 11 new coal-fired power plants in Texas. KKR said they would not proceed with the takeover without the blessing of the advocacy groups.

During the negotiations, the environmentalists convinced KKR that after the takeover, TXU should a support mandatory national cap-and-trade global warming legislation. Prior to that, TXU had been a vocal opponent of any mandatory controls. KKR also agreed to cut TXU’s overall emissions to 1990 levels by 2020, and to increase their investment in clean, renewable energy.

“Today’s announcement is a direct result of our work with EDF and other environmental leaders during the TXU acquisition last year,” said Marc Lipschultz of KKR. “That historic transaction was a significant step forward in incorporating environmental considerations into investment decisions as it set a new standard for conservation and efficiency in the energy industry.”

“The private equity industry is known for its focus on improving business performance and for the rigorous process it uses to set goals and track improvement in portfolio companies,” said Gwen Ruta of the Environmental Defense Fund. “This groundbreaking new partnership between KKR and EDF will use the transformational power of private equity to achieve environmental goals.”

KKR’s Lipschultz describes the partnership this way: “We and EDF agreed to pursue an innovative, cost-effective approach to using the private equity model to bring about improvements in environmental performance for a variety of companies, including our own internal operations. We believe this initiative will ultimately help our portfolio companies build upon their own environmental efforts while providing a workable example that may encourage other companies to make similar progress.”

KKR is making other significant changes: In April, it announced that Ken Mehlman will join the firm in the new position of head of global public affairs. He will also be a managing director.

Mehlman is currently a partner at Akin, Gump, Strauss, Hauer & Feld, LLP. He has previously held high-level positions on Capitol Hill and the White House, including tenure as chairman of the Republican National Committee and campaign manager of George W. Bush’s 2004 presidential campaign.

“We have been increasingly engaged with a wide range of constituents in recent years,” said KKR co-founders Henry Kravis and George Roberts. “As we continue to communicate the public benefits of private equity, Ken is a wonderful addition to our executive team, allowing us to expand and institutionalize our outreach to key groups across our portfolio.”

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