Sustainability program brings $1B valuation increase

Posted by Rupert on Jun 7th, 2010 | no comments home title

About the Author: During more than two decades as a consultant and entrepreneur in business and sustainability, Rupert Davis has worked at the investor, owner, board and chief executive levels. Today, as global head of MontaRosa’s Sustainability Practice, Rupert combines his finance background with a unique understanding of long-term environmental business engagement issues, including climate change action, triple bottom line entrepreneurship and clean tech development. Read more from this author

June 2010: Private equity firms show $1B valuation increase in portfolio companies through sustainability efficiency program.

A recent collaboration between a top five private equity firm and an environmental NGO has produced a portfolio valuation increase greater than $1B ($150M annual earnings increase/cost savings on 7x earnings multiple), from only a dozen companies. The sustainability cost cutting program has yet to be scaled through the entire portfolio.

According to a senior executive of another major PE firm, just one portfolio company (investors include three of the US’s largest PE firms) has shown a valuation increase of $50 million through their energy, water and waste efficiency programs. They are now hiring high-level sustainability talent across their portfolio in order to scale sustainability/efficiency efforts.

It seems PE firms have found an innovative way to increase earnings and valuations. Using a systematic sustainability efficiency framework rigorously focused on investment return, they are uncovering substantial cost savings and increasing operational performance. Most of this is without large investment. MontaRosa has been promoting this valuation increase approach for the past 18 months with a white paper submitted to Harvard Business Review.

Clearly it makes strong financial sense for a PE firm to have an operational talent running these programs throughout the entire portfolio – the multiple on the leadership investment is a number of orders of magnitude.

We recently assessed some of the talent who sit in the sweet spot of delivering these kinds of large efficiency gains while recruiting a CSO for a Fortune 500 consumer products company and developing a book with Harvard. Though truly top talent are hard to find, $1 billion in portfolio valuation speaks to the opportunity.

Rupert
Head of Sustainability

MontaRosa is one of the few firms with in-depth analysis of sustainability talent and an understanding of the business valuation increase strategy. We recruited the globally #2 ranked sustainability leader for our last client, having providing them the choice of the #1, #2, #7. We know the subject, have access to the very top players and close deals.

To learn more about MontaRosa and our Sustainability Practice please visit http://montarosasustainability.com/

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