The phrase “money talks” may turn in favor for corporate social responsibility soon, as large private equity firms and investors start looking at long term feasibility and realizing that without sustainable solutions, companies will fail to build value. Private equity firms in particular will have profound influence on the reduction of carbon emissions and eliminating corruption in the business world, because these firms each own dozens of companies.
“Today, companies must address what I call the legitimacy question,” says Ken Mehlman, head of global public affairs at KKR.
Recent disasters have shown that companies are not sufficiently attentive to the external factors of doing business. The internet has also made transparency crucial, as there is always someone watching how companies handle challenges. The approach of KKR for sustainability is to provide win-win strategies for companies they invest in. KKR does not invest in companies that do not have a solid plan for handling environmental, social and governance issues. Ken Mehlman uses Sealy’s transportation efficiency strategy as a way to help reduce carbon emissions as well as save money for the company.
Alan Holt of the Carlyle Group in Washington, D.C. says, “simply put, we believe that financial performance and environmental improvements are complementary and they are in the best interests of our portfolio companies and our investors.” They invested in a sustainable fishery in China to help stabilize the fishing industry, save jobs, and improve the depleted fish stock. The Carlyle Group was one of the first firms to adopt responsible capitalism and investment guidelines, and today similar policies are common in the industry. Carlyle also helped facilitate new food safety guidelines for formula companies in China. Carlyle Group, along with KKR, work with the Environmental Defense Fund to develop tools and metrics to help create sustainable development plans for companies and real estate.
Calvert Investments has been pushing for responsible capitalism for nearly 25 years. Calvert, along with Trillium Asset Management, is currently leading a campaign of 27 investors to push the Environmental Protection Agency to review the Clean Water Act in regards to the Pebble Mine project in Bristol Bay in Alaska. The regulation regards waste disposal, and the investors are concerned that the mine waste will contaminate the waters. The group collectively manages over $35 billion in assets.