Private Equity going "Sustainable" - PEI Forum in NYC

June 5 2011

This past week in New York, PEI (Private Equity International) held it's annual  Responsible Investment Forum in conjunction with the PRI (Principles for Responsible Investing).  It should really be no surprise that PE Investors, who have in many cases shown foresight, investment expertise, and most of all patience, are embracing the principles of "Sustainable Investing".  These are the investors, perhaps even more so than traditional asset managers and hedge funds, who can think long-term and accumulate assets which offer both good value and prospects for great cashflow visibility.

Opening the event was George Roberts Co-Founder of KKR which is now making inroads to invest in European renewable energy opportunities including wind power....Seems awfully sensible given the necessity of converting the world's power infrastructure away from carbon.  Mr. Roberts said that embracing the principles of ESG (Environmental, Social and Governance) investing is being driven by demand from his investors.  "It's the right thing to do, it's good for business, it's profitable..."

The panel on which I participated was entitled  "Show me the Money: Linking ESG with IRR" and addressed the various definitions and angles of Sustainable Investing.  The discussion centered around the view that generating great investment research necessitates  pursuing every avenue of inquiry which leads to a better understanding of risk adjusted returns.  Although it's challenging to prove not just correlation but causality, it's hard to deny the value derived from deep analysis of energy efficiency initiatives, supply chain management, product and process innovation, labor force engagement, powerful corporate brands, reputation and governance.

For anyone who wants to get a rapid and robust education about all the issues associated with sustainable and responsible investing, I would recommend heading down to Washington DC next week for the SIF "Impact and Innovation" Conference on June 9th and 10th.  Critical issues including policy  implementation, conflict minerals, fiduciary obligations, climate change solutions and food security will be addressed over the course of the days.

Just as "Sustainable Investing" is indeed demanded by the clients of Private Equity firms, the message of mainstreaming is being echoed loudly across a much broader world community including Asset Managers, Asset Owners, Consultants, MBAs, CFAs, Private Wealth Managers, Hedge Funds...The writing is on the wall for the necessity of a better investing framework which helps to identify more durable, sustainable returns.  Perhaps this could be the best legacy to hope for after this slow painful post-crisis economic recovery.

- Erika Karp












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