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Private equity giant Carlyle working with Dutch pension funds on ESG

Firm reveals “working partnerships” with funds

Carlyle, the private equity titan with $148bn (€112.5bn) in assets under management, says it is working with Dutch pension management giants PGGM and APG to help it improve its environmental, social and governance (ESG) practices.

The Washington-based firm, which is 5% owned by CalPERS, the California Public Employees’ Retirement System, said it has “formed working partnerships” with PGGM and APG, which run assets of €109bn and €280bn respectively.

Their “advice and experience on ESG issues will, we believe, improve our practices”, Carlyle says in its new 2011 Citizenship Report, its second.

The relationship with the two Dutch giants stems from Carlyle’s acquisition of a controlling stake in private equity firm AlpInvest from the funds last year.

“ESG considerations played a significant role in the transaction,” Carlyle says. “All parties have agreed to share ideas and practices regarding how to best integrate ESG issues into our investment decision making throughout our portfolio. We hope to learn from their deep experience and expertise on ESG issues.”

Carlyle and the funds met in Amsterdam in November last year, the report states. The agenda focused on reporting and developing metrics, integrating ESG into emerging markets investments, social issues and real estate.Carlyle intends to meet the funds at least once a year to exchange ideas. It also says it will “sharpen its focus” on social issues – particularly in Sub-Saharan Africa – as one of its three corporate citizenship objectives in 2012. It will also integrate sustainability into its US real estate investments and continue to develop metrics to measure ESG progress.

The firm has used the “EcoValuScreen” process that it developed with the Environmental Defense Fund to screen some recent transactions, resulting in reduced costs at portfolio firms.

“We hope to learn from their deep experience and expertise on ESG issues.”

“We pledge to continue our work in these important areas and to report our progress each year,” the firm said.

Carlyle developed its own set of responsible investment guidelines in 2010 and says it important that investee forms “operate in a manner that is consistent” with them.

“Through our role as active owners, we can work with our portfolio companies to facilitate their evaluation of the ESG issues associated with their businesses.”