Better Businesses Better Results - Carlyle
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Better Businesses Better Results
INSIDE THE IMPACT REVIEW
INTRODUCTION
01 Letter from our CEO, Kewsong Lee 3
Impact Highlights 4
02 OUR APPROACH TO IMPACT 7
03 ESG INTEGRATION IN GLOBAL CREDIT 11
04 GLOBAL INVESTMENT RESOURCES 14
PERSPECTIVES ON 16
05 ESG-LINKED FINANCING TOOLS
A Conversation with Megan Starr
and Sam Lukaitis
OUR IMPACT AT CARLYLE 19
06
Addressing Cyber Threats 20
Impact at Carlyle 21
Carlyle’s Annual Sustainability Workshop 22
PORTFOLIO COMPANY CASE STUDIES 23
07
Amp Energy 24
Dept 27
Liberty Tire Recycling 28
Novolex 30
Pharmapacks 32
Pharmaceutical Product Development, Inc. 34
08 CORPORATE ESG DISCLOSURES 36
Click on section numbers and underlined hyperlinks
throughout the Impact Review to quickly explore new
sections, pages, and additional content.
CARLYLE 2021 IMPACT REVIEW
LETTER FROM OUR CEO
Better Businesses,
Better Results
While 2020 was a challenging year, it
underscored that our focus on building better
businesses is more important than ever.
As I laid out in our strategic plan during of the One Planet Private Equity Funds
our 2021 Investor Day, Carlyle is focused on Initiative, initiated carbon footprinting
accelerating growth for an accelerating across several of our investment strategies,
world; nowhere is this more true than and completed more than $6.5 billion in
in our approach to impact. In a rapidly ESG-linked financings. This included the
changing world, we believe impact formation of the largest ESG-linked private
is a lens for finding efficiencies and equity credit facility in the U.S., a $4.1 billion
capitalizing on new growth, as we see the vehicle with the price of debt directly tied
market valuing a wider set of business to our goal of having 30% diverse directors
models and competencies. By helping our on the boards of Carlyle-controlled
portfolio companies improve across these companies within two years of ownership.
dimensions—from creating sustainability-
driven growth strategies to building more As I said last year, at Carlyle, impact isn’t a
diverse teams—we believe we will build product; it is a process. This year, I add that
more valuable businesses and deliver impact is also a mindset, as we continually
better results for all stakeholders. look to find ways to build better businesses
and ultimately, better results. While 2020
Impact generation is value creation for the was a year of significant progress, our work
21st century, and we clearly highlight those and commitment to these efforts continue
results in our 2021 Impact Review. From in 2021 and beyond. We are grateful for the
our sale of Liberty Tire Recycling, where partners we have in this important journey
sustainability helped drive buyer demand, and look forward to sharing more with you
to our investment in Amp Energy, which in the year to come.
is accelerating the low-carbon energy
transition, we see opportunities for better
results across industries and geographies.
As a firm, we also had several notable
milestones over the past year. We
published our first Taskforce on Climate-
related Financial Disclosures (TCFD) report KEWSONG LEE
on climate-related financial risks and Chief Executive Officer
opportunities, became a founding member June 30, 2021
CARLYLE 2021 IMPACT REVIEW 3
IMPACT HIGHLIGHTS
2020 AND EARLY 2021
IMPACT HIGHLIGHTS
$6.5BN
reached in ESG-linked financings
Fourth
year of corporate carbon neutrality
75%
of our employees work
from offices with
major green-building
certifications
$382MN
in capital committed to renewable
Five
full time ESG & Impact professionals
and sustainable energy companies
80% 100+
of our employees Partnered with
$4.1BN The only private
participated in
unconscious bias
training
organizations to address the
impact of the COVID-19 pandemic on largest ESG-linked U.S. private
equity firm
vulnerable communities equity line of credit included in the Bloomberg Gender-Equality Index
First
Published our
100%
score for the fourth
274 of new renewable
MW
year in a row on energy capacity
the HRC Corporate
32MN
installed...
Equality Index
Taskforce on Climate-related Financial
Disclosures report ...these investments save
the equivalent of 32MN
gallons of gas annually
CARLYLE 2021 IMPACT REVIEW 4
IMPACT HIGHLIGHTS
GLOBAL REACH OF RENEWABLE
ENERGY INVESTMENTS IN 2020
United
Kingdom
United
Spain
States
Japan
India
Six
countries reached by the acquisition,
financing, development, and construction
of renewable energy projects
Australia
284,521
MTCO2e total CO2e avoided from the grid
CARLYLE 2021 IMPACT REVIEW 5
IMPACT HIGHLIGHTS
DIVERSITY, EQUITY & INCLUSION GLOBAL DIVERSITY BOARD DIVERSITY
A
t Carlyle, we know that
diverse teams perform
better, so we seek to create 23% 29% 44%
a community where we of our current
senior leaders are
of senior leader
new hires were
of our current
employees are
56%
women women women
continually exchange insights,
embrace different perspectives,
and challenge the status quo.
We believe diverse teams ask of new directors in our goal-
eligible controlled companies
better questions and inclusive globally were diverse1
teams find better answers.
46% >50% 58%
of our $260 billion of our new hires in
of our new hires in AUM is managed Europe and 52% in
were women by women Asia were women
U.S. EMPLOYEE DIVERSITY
26%
of our current U.S.
37%
of our current
42%
of our new hires in
senior leaders are employees in the U.S. the U.S. were ethnic
women are ethnic minorities 2 minorities
54%
of our U.S. investment
56%
of our 2021 U.S.
63%
of our new hires in
professionals new hires Corporate Private Equity the U.S. were women or
women, Black, Latinx, or associate class are women ethnic minorities
Two or More Races or ethnic minorities
1
Directors added to Corporate Private Equity-controlled portfolio companies that were held for two years as of Dec. 31, 2020. Diversity data by gender women
(globally) and race/ethnicity data is represented in the U.S. and where local regulations allow.
2
U.S. ethnic minorities include American Indian/Alaskan Native, Asian, Black, Hispanic, Native Hawaiian, other and two or more races.
Representation data as of 1/1/21. Hire data as of 12/31/20.
CARLYLE 2021 IMPACT REVIEW 6
SECTION TWO
Our Approach
to Impact
CARLYLE 2021 IMPACT REVIEW 7
OUR APPROACH TO IMPACT
A
process is only as good as its results. Our 2020 CLIMATE RESILIENCE
Impact Review described how we embed impact We led our peers as one of the first
global investment firms to publish a
into our investment processes by reimagining our TCFD report on the climate-related risks
and opportunities we see across our
core Environmental, Social, and Governance (ESG) business.
integration, focusing on systemically important We participated as a founding
issues—such as climate change, ESG data, and member of the One Planet Private Equity
Funds Initiative (OPPEF) with a group
diversity, equity, and inclusion—and using the levers of of investors committed to integrating
climate change analysis across our
private capital in new and innovative ways. investment processes.
We closed several investments through
our Renewable and Sustainable Energy
platform, a dedicated team addressing
the energy transition by investing
globally in the renewable energy and
Last year’s report focused on how we and Impact team globally, adding new sustainable resources sector, such as our
embed impact; the 2021 Impact Review expertise in EMEA and the U.S., along with investment in Amp Energy profiled on
focuses on what results that leads to. hiring our first dedicated professional page 24.
The key dimensions of impact at Carlyle focused solely on ESG in Global Credit.
are sustainable growth, climate resilience, We initiated bottom-up carbon
strong stakeholder ties, engaged We revised and refreshed our firmwide footprinting for our majority-owned
employees, and diverse and inclusive ESG Policy and our Investment Exclusions companies in the latest generation
teams. We believe businesses that excel and Parameters policy, which provide funds in our three primary Corporate
along these dimensions increasingly guiding frameworks to enable more Private Equity strategies: US Buyout,
outperform their competitors. In addition, efficient and effective decision-making. Europe Buyout, and Asia Buyout. Carbon
we believe that as our firm excels along footprints are used to inform work across
these dimensions, we will consistently build We reimagined our approach to core portfolio companies, such as Novolex’s
on our capabilities to deliver results for ESG integration by building a new carbon reduction targets highlighted on
our stakeholders. Some highlights from our ESG assessment for our private equity page 30.
work this year include: investments, engaging in a host of value
creation activities across our portfolio We hosted a climate scenario
companies highlighted through case workshop to model the potential impact
studies in section 7 and designing a on Carlyle’s investment portfolio under
SUSTAINABLE GROWTH proprietary ESG materiality analysis tool different climate scenarios.
to support our Global Credit platform
We continued to strengthen the firm’s highlighted in section 3. We achieved our fourth year of
governance on sustainability, with regular carbon neutrality across our own
updates to the Carlyle Board of Directors THE RESULT: We developed corporate activities.
on our strategy and oversight from Janet robust governance and effective ESG
Hill, Carlyle independent director and integration, which we believe drive THE RESULT: We positioned Carlyle
Board lead on ESG and Impact. better-informed investment decisions, and our portfolio companies to better
more avenues for value creation, and mitigate the risks and capture the
We expanded our dedicated ESG stronger risk management at Carlyle. opportunities from climate change and
the energy transition.
CARLYLE 2021 IMPACT REVIEW 8
OUR APPROACH TO IMPACT
At our Sustainability Bridge, Responsible Investment Forum,
Workshop, companies Business for Social Responsibility,
Ceres, and more. We also are an active
learned about creating member of the AIMA Global Responsible
climate-resilient strategies, Investment Committee, the Emerging
Markets Private Equity Association
how to build and retain (EMPEA), the European Leveraged
a diverse and inclusive Finance Association (ELFA) ESG Working
Group, the Private Equity GP ESG Working
workforce, and best practices Group, and became a formal supporter
in building board-level ESG of the TCFD in 2020.
competencies.
We hosted a Sustainability Workshop
with more than 60 attendees from our
portfolio companies to help inform and
STRONG STAKEHOLDER TIES create connectivity across our platform.
Companies learned about creating
We published our second year of climate-resilient strategies, how to
Corporate ESG Disclosures in section 8 of build and retain a diverse and inclusive
this report, which draw from best practices workforce, and best practices in building
across the Global Reporting Initiative (GRI) board-level ESG competencies.
and Sustainability Accounting Standards
Board (SASB) frameworks. For the first time THE RESULT: We clearly communicated
in 2021, we incorporated guidance from with our key stakeholders and
the World Economic Forum’s International contributed to significant developments
Business Council’s work on common in the ESG and impact sector.
standards for ESG.
We hosted several ESG and impact
events for our fund investors, including ENGAGED EMPLOYEES
thematic sessions, such as our “Not
Another ESG Data Call” in December We provided resources to our portfolio
2020, geographic gatherings, such as a companies designed to benefit employees
remote event for our Japanese investors, and enhance their experiences. Our Talent
and ESG presentations at several Investor and Organization Performance team works
Advisory Committees (IACs) as well as at with portfolio company management to
our 2021 Investor Day. maximize organizational and leadership
effectiveness, as profiled through our
We published regular ESG reporting, work with Pharmapacks on page 32. Our
including bespoke ESG reports for several Healthy Benefits Initiative helps drive better
of our largest strategies, as well as healthcare outcomes for portfolio company
thought leadership such as a podcast employees at lower costs, demonstrated
and white paper on integrating ESG in through our work with PPD on page 34.
Global Credit.
We further strengthened Carlyle’s own
We participated in a variety of industry human capital best practices through
conferences on ESG and impact, such facilitating an annual employee feedback
as Financial Times’ Investing For Good, survey and providing significant remote
SuperInvestor, SuperReturn, Pension wellness services to employees, such as
CARLYLE 2021 IMPACT REVIEW 9OUR APPROACH TO IMPACT
meditation and yoga classes throughout people. All nominees for promotion to
the pandemic. Our fulsome approach to Managing Director in 2020 took part
human capital is further detailed in our in a full-360 assessment that included
63%
Corporate ESG disclosures. an evaluation of their skills in inclusive
leadership and management.
We hosted regular trainings for
employees on ESG integration and We made continued progress in
emerging thematic ESG issues. The ESG cultivating a diverse workforce at our firm. of new hires in the U.S. were women
and Impact team hosted trainings for new 63% of new hires in the U.S. were women or ethnic minorities
employees, as well as ongoing education or ethnic minorities; 58% of new hires in
for members of our workforce, several Europe and 52% in Asia were women.
58%
internal events, such as remote lunches on
the topics of ESG and impact investing, We expanded our board diversity
climate change and renewable energy. goal to 30% of all directors in Corporate
Private Equity-controlled portfolio
We organized an array of volunteering companies by 2023. In 2020, 56% of new of new hires in Europe
activities across our global offices. directors in our goal-eligible controlled were women
companies globally were women, Asian,
THE RESULT: We developed and launched Black, or Hispanic.
an evolving toolkit to help drive value
52%
through better human capital practices at We achieved a perfect score for
Carlyle and across our portfolio companies. the fourth year in a row on the HRC
Corporate Equality Index.
Carlyle and AlpInvest became of new hires in Asia
DIVERSE AND INCLUSIVE TEAMS signatories to the Institutional Limited were women
Partners Association Diversity in Action
More than 80% of our employees initiative, representing our commitment
participated in virtual Better Decisions: to advancing diversity, equity, and
Mitigating Unconscious Bias training inclusion (DEI) in the workplace with
sessions facilitated by leaders from our investment partners and ways, but it also highlighted one of the and indeed indicative of overall We build better
across the firm. The initiative seeks to the broader global investment most important components of our ESG management excellence.
build awareness of unconscious bias and management industry. work—dynamic materiality. ESG issues businesses because
provides concrete tools and practices to are always evolving and changing. We like to say that we will never we believe they deliver
mitigate the negative effects of bias. We partnered with Ascend and Carlyle and our portfolio companies reach “ESG nirvana” and conclude our
100 other organizations to support therefore must constantly look for new, work. We look forward to continued
better results.
More than 600 of our employees an action agenda to address the emerging material issues to continue collaboration with our portfolio
globally participated in listening sessions adverse impact of the pandemic on to manage risks and opportunities. companies and partners in this ongoing
where employees shared their unique vulnerable communities. Throughout the COVID-19 pandemic, quest to better understand and manage
experiences with multicultural differences. we saw business models rapidly and the material ESG issues we face in a
This inspired our people to expand THE RESULT: We achieved clear often significantly shift to adapt to new rapidly accelerating world, as we believe
beyond the lens of their own perspective progress toward increasing the circumstances. Over the past year, we this will enable us to drive long-term,
and build a deeper understanding to be diversity of our teams and portfolio observed that agile, forward-thinking, sustainable value.
more effective allies. company boards. The data from our and focused management teams with
own companies support the growing a broad range of stakeholders better
We made inclusion a core management consensus that diversity improves navigated the significant disruption.
and leadership competency central in decision making and financial outcomes. We believe these characteristics
the development and assessment of our 2020 was a year of disruption in many are indicative of ESG competencies
CARLYLE 2021 IMPACT REVIEW 10SECTION THREE
ESG Integration
in Global Credit
CARLYLE 2021 IMPACT REVIEW 11ESG INTEGRATION IN CREDIT
T he field of ESG has long been a focus for equity markets,
but in the past few years we’ve seen its growing
importance for credit markets, alongside a heightened
focus on ESG from other credit market participants, such as
management teams and financial sponsors.
In our Global Credit business, we use several country-level ESG risk data sets
differentiated data sets that provide for geographies where an asset has
us with the information needed to make major operations or supply chains. This
better decisions—we have found that gives additional color on issues such as
ESG data are increasingly one of those corruption, anti-money laundering, and
differentiated tools. However, credit the physical risks of climate change.
presents unique challenges for good
ESG integration. When compared to Credit research analysts use our tool
private equity, credit frequently has as an input to their fundamental
higher deal volume, shorter diligence diligence to help efficiently understand a
windows, less access to management company’s or asset’s exposure to material
and data, and fewer high-quality ESG ESG risks, as well as determine how
tools to analyze investments. Based well risks are managed. Using the SASB
on the foregoing, we knew we needed data and our own proprietary inputs,
a systematic approach that could the tool also guides credit research
integrate into our fundamental credit analysts through potential engagement
investment processes, and which would topics and questions and offers tailored
help us efficiently and effectively metrics tied to material ESG issues. As
identify and analyze material ESG issues of January 2021, this ESG materiality
for a given investment. analysis is performed for each new
investment our Global Credit Investment
Led by a cross-platform ESG working Committee considers, and a summary
group, we rigorously surveyed the field of the ESG analysis is included in the
of available ESG resources for our Global Investment Committee memorandums1. We
Credit platform, but couldn’t find existing constantly refine our proprietary tool as
tools fit for our purposes. Over the we gather feedback from our investment
course of 2020, we built a proprietary professionals and incorporate new data
ESG materiality analysis tool using the sets and emerging thought leadership.
Sustainability Accounting Standards
Board (SASB) standards, which helps us While we have traditionally evaluated
focus in on an industry and sector’s most many of these risks during our diligence
material ESG issues. Launched across process, this new proactive and systematic
most of our Global Credit platform in approach helps pull to the forefront of
January 2021, the tool also integrates the investment process some of the less
1
This does not include Carlyle’s Aviation and Structured Credit strategies. These teams have tailored ESG processes more relevant to their distinct strategies.
CARLYLE 2021 IMPACT REVIEW 12ESG INTEGRATION IN CREDIT
with third-parties, we discovered that less control over our credit investments
the target company employed aggressive than our equity investments, we seek to
lead generation and marketing practices monitor emerging ESG risks in our credit
to secure new customers. Given the investments over our investment period
target demographic was both older and and engage with equity sponsors and
lower-income, and the aggressive sales management teams where appropriate.
practices uncovered, our team declined
to pursue the transaction. A common misconception is that ESG is
an “end state” or that there is a rules-
Lastly, one of our credit investments based implementation for sustainability.
in a shipping company was impacted At Carlyle, we focus on how to make
by significant travel restrictions during better decisions over time in pursuit of
the COVID-19 pandemic. This presented exceptional outcomes. As our Global
difficulties in conducting timely crew Credit platform continues to grow, we
changes and led to extended crew have found that ESG integration continues
stays on board. The team monitored to be a valuable tool that can give us a
the situation and helped to provide more fulsome set of data to make better
additional mental health support to decisions and mitigate downside risks.
the seafarers. While we frequently have
obvious, but potentially significant risk For example, one of our Global Credit diligence information can promote better
factors for a new investment. Integrating teams analyzed an investment located investment decisions over time.
ESG data and analysis gives us the ability on coastal real estate and identified
to properly price deals and ensure we potential material downside physical Our Direct Lending team evaluated
are compensated as investors for the risks from climate change, such as the another opportunity in 2020 alongside
associated risks, and in certain cases impact from sea level rise or an increase several sponsors to provide financing
determine not to make an investment. We in extreme weather events. These to a direct-to-consumer marketer
believe this approach, paired with our material risks were one of the factors and installer of home repair and
dedicated internal ESG expertise, provides that led to us declining to pursue that remodeling services. The company’s
us with a consistent and advantaged particular investment. target demographic was seniors; 81%
footing to assess, monitor, and manage of customers were older than age
these highly relevant risks, and ultimately Our access to better ESG data and 55 with lower-than-average FICO
make better investment decisions. information could lead us to develop scores. Relative to the target customer
strategies to mitigate the associated demographic, the cost of revenue from
Integrating ESG represents an evolution in risks, or ultimately lead our team to pass the company’s average job—$10,000—
our investment process. These factors do on an investment if we do not believe we was very expensive, representing more
not necessarily eliminate or prevent us from are appropriately compensated for those than 10% of the average consumer’s
considering certain investments, but instead risks. ESG is a lens through which we can annual income and 5 to 10% of the
help us to increase the nuance with which focus on material information that when average overall home costs. After
we can underwrite and price risk. considered and integrated with other various channel checks and diligence
CARLYLE 2021 IMPACT REVIEW 13SECTION FOUR
Global
Investment
Resources
CARLYLE 2021 IMPACT REVIEW 14GLOBAL INVESTMENT
RESOURCES
A NETWORK OF SUBJECT-MATTER EXPERTS
T he ESG acronym spans so many topics, it would
be impossible for any one person or team to be
an expert in all of them–from energy management to
environmental liabilities, diversity and inclusion, anti-
corruption and bribery, cybersecurity, and more.
At Carlyle, our dedicated ESG and Impact investment thesis and identify potential
team serves a connective function— opportunities to improve portfolio company
ensuring the most material ESG topics operations. Post-investment, the GIR team
are covered during diligence, engaging also seeks to support portfolio company
with third-party specialized expertise management teams to execute these
as appropriate, advising companies on objectives, which in some cases may mean
sustainability strategies, and tracking and driving transformational change at a
reporting on ESG data—but we also have portfolio company.
specialized teams of in-house experts for
critical functional areas. The GIR team has several critical functional
areas in addition to ESG and impact,
While these areas are sometimes grouped including talent and organizational
under the ESG “umbrella,” we believe performance, digital transformation,
they are distinct fields which require information technology, procurement,
skilled specialists. To drive better results, transaction support, revenue growth, and
Carlyle has institutionalized a number of government affairs. In addition to our ESG
these important areas to enhance our and Impact team, Carlyle has a dedicated
competitive “edge” in sourcing, diligence, Diversity, Equity and Inclusion (DEI) team. We
and value creation at portfolio companies. believe ESG is a team sport, and Carlyle’s
Our Global Investment Resources (GIR) team Global Investment Resources capabilities work
is a group of more than 20 professionals to ensure that we have our bases covered.
dedicated to strengthening operations
and creating growth with our portfolio
companies. Carlyle’s ESG and Impact
function sits within our GIR team, alongside
20+
other areas of functional expertise.
The GIR team works collaboratively with
Carlyle investment professionals during
the deal lifecycle and focuses on creating professionals make up our GIR team,
value during the transaction process and dedicated to strengthening and growing
our portfolio companies
through our partnership. During diligence,
the GIR team seeks to understand the
CARLYLE 2021 IMPACT REVIEW 15SECTION FIVE
Perspectives
on ESG-linked
Financing Tools
A CONVERSATION WITH MEGAN STARR,
GLOBAL HEAD OF IMPACT, AND SAM LUKAITIS,
DIRECTOR, CAPITAL MARKETS GROUP
CARLYLE 2021 IMPACT REVIEW 16PERSPECTIVES ON ESG-LINKED
FINANCING TOOLS
E SG-linked financing aligns investment and sustainability
outcomes in innovative ways. We’re proud to be an
early adopter of integrating environmental and social
considerations into financing arrangements. Megan Starr,
Carlyle’s Global Head of Impact, and Sam Lukaitis, a Director
in Carlyle’s Capital Markets Group, discuss our firm’s
evolution in the ESG space and the impact the firm has on
elevating the ESG agenda across the private equity industry.
MEGAN STARR
Global Head
Q SAM LUKAITIS
Director, Carlyle
of Impact at Carlyle Capital Markets Group
Q: Why is Carlyle
interested in integrating
ESG continues to grow in prominence across
industries, a trend that has accelerated
recently with the pandemic.
ESG considerations into its
financing arrangements? At the same time, we work alongside several
portfolio companies with sophisticated
sustainability strategies, such as Jeanologia,
We increasingly see a developer of eco-efficient technologies
SAM LUKAITIS
ESG incorporated into for the denim industry, and Logoplaste, a
financings across the corporate investment manufacturer of rigid packaging solutions,
grade world demonstrated by the growing and consistently consider how to drive
number of green bonds, green loans, further progress. We therefore saw a real
and other green “use of proceeds” deals. opportunity to take these strategies and
But the leveraged debt issuance coming formalize them into the portfolio companies’
out of the private equity ecosystem has capital structures for the first time, and thus
been historically slower to engage with created new, financially accretive methods
ESG themes in the same way. That has to incentivize even stronger performance
changed over the last couple of years as on quantitative ESG metrics.
CARLYLE 2021 IMPACT REVIEW 17PERSPECTIVES ON ESG-LINKED
FINANCING TOOLS
PORTFOLIO AND FUND-LEVEL
TRANSACTIONS SINCE 2018 MEGAN STARR
These financings are
prime examples of
three of our ESG priorities. First, our
Q: How long has Carlyle
focused on ESG
board diversity and we believe it is a
critical issue for us to prioritize.
firmwide framework for identifying integration and what are the AlpInvest has also secured an ESG-linked
20 1 8 2020 material ESG issues in due diligence credit facility for its Co-Investment Fund
is grounded in the Sustainability
milestones achieved so far? VIII. The results are tied to objectives
Accounting Standards Board (SASB) at both the fund and AlpInvest level,
JEANOLOGIA LOGOPLASTE standards. This framework provides In the last few years, providing an effective incentive to further
SAM LUKAITIS
our investment professionals with a we believe Carlyle ESG integration across AlpInvest’s business
Margin ratchet linked to Margin ratchet linked to
CO2 savings.
structured guide for focusing on the has really pioneered integrating and through its wider spheres of influence.
water savings.
most material ESG issues during the environmental and social considerations
Represented the first European
sponsor-backed financing with
debt pricing directly linked to
ESG factors.
Represented the first
institutional term loan with
ESG metrics issued by a
private equity sponsor.
investment process. These issues, in turn,
have formed the basis for many of the
ESG-linked financings we’ve structured.
into financing arrangements of portfolio
companies in Europe. Examples include
Jeanologia (2018), Logoplaste (2020),
Flender (2021), and Acrotec (2021)
Q: What are the benefits
of these transactions for
Second, Carlyle is focused on driving highlighted on to the left.
the different stakeholders?
positive ESG change over time at our
portfolio companies and we believe There has been a unique angle to each On a macro level,
202 1 MEGAN STARR
ESG-linked financings provide an of these transactions. We secured pricing ESG-linked financings
effective tool to further structure that on the company’s debt tied directly to further incentivize strong progress on
change thesis into our deals. This is how material environmental ESG factors, material ESG issues and drive better
FLENDER ACROTEC we incentivize additional progress on such as water (Jeanologia) and CO2 financial outcomes for our portfolio
Margin ratchet linked to the “Use of proceeds” margin material ESG issues that are important (Logoplaste) savings. On the Flender companies and our key stakeholders.
installation of new gearboxes ratchet which can be accessed across our portfolio, from climate change transaction, we incentivized management Our portfolio companies are excited by
in wind turbines. Company for initiatives that improve and the energy transition to diversity to accelerate a business line that helps these structures. Management teams
also plans to pass on a environmental performance.
and inclusion, and resource efficiency. to deploy wind power, while at Acrotec are increasingly focused on sustainability
portion of interest savings to
environmental charities. a “green use of proceeds” was structured and recognize its importance in creating
And finally, we continuously assess into its revolving credit facility to help business value. These transactions
Represented one of the largest what is next in the ESG space. As incentivize capital expenditure projects create tangible examples of aligning
ESG-linked loans in the Term previously mentioned, there is a with a significant environmental benefit. business priorities with quantitative ESG
Loan B market at the time.
concept of dynamic materiality in the metrics. We believe that progress on
field of ESG as new, important issues While each financing was structured environmental and social targets clearly
constantly emerge for companies to differently, these loans all seek to align leads to costs savings. We’re excited by
notice and manage. We’re eager to incentives and reward management teams the broad uptake and to see companies
ESG-LINKED CREDIT ESG-LINKED CREDIT innovate by using the traditional for positive environmental progress. using these transactions to further their
FACILITY FOR CARLYLE’S FACILITY FOR tools of private equity and these sustainability strategies. Anecdotally,
AMERICAS CORPORATE ALPINVEST CO- financings are a great example of how More recently, we have we’ve also seen increased demand
MEGAN STARR
PRIVATE EQUITY INVESTMENT FUND VIII we take a creative lens to advance looked at ESG-linked for debt issuances that have this ESG
PLATFORM Margin ratchet linked to ESG the intersection between profitability, financings at the fund level. In February linkage, which is another helpful outcome.
Margin ratchet linked to board metrics at both the Fund and environmental, and social outcomes. 2021, we secured the largest ESG-linked
diversity of portfolio companies. AlpInvest level. private equity credit facility in the U.S.—a Management teams
SAM LUKAITIS
$4.1 billion facility for our Americas across our portfolio are
Represented the largest ESG- Represented the first ESG-linked
credit facility for a private
Corporate Private Equity platform. In this keen to strengthen and highlight their
linked private equity credit
facility in the U.S. ($4.1 billion). equity fund-of-fund. facility, the price of debt is directly tied to impressive sustainability credentials. Now,
our goal of having 30% diverse directors we can provide them with an effective
on the boards of Carlyle-controlled tool to formalize these concepts into
companies within two years of ownership. capital structures and the increased
We believe this is the first facility of its external visibility has been empowering
Portfolio Transaction Fund Level Transaction kind to focus exclusively on advancing and rewarding for these businesses.
CARLYLE 2021 IMPACT REVIEW 18SECTION SIX
Our Impact
at Carlyle
CARLYLE 2021 IMPACT REVIEWOUR IMPACT AT CARLYLE
ADDRESSING CYBER THREATS and minimize the impact of critical
exfiltration are important attributes of
A
a successful cyber-attack response. We
s the world recovers from the challenges presented work closely with companies to ensure
by COVID-19, businesses are experiencing a rapid that effective business continuity plans
and data protection programs are in
transformation in how their customers, employees, and place. Our experience with cyber threats
has also taught us that education is key
suppliers interact. While these changes have unlocked in the ability to effectively respond to
and mitigate the harmful effects of a
new opportunities, we also believe they have enabled an cyber incident. To ensure an effective
and coordinated response to cyber
unprecedented number of cyber threats. incidents, we provide training and support
resources tailored to our technical,
financial, and operational portfolio
company leaders.
Carlyle seeks to ensure that our portfolio a prerequisite for executing an effective
companies have the capabilities necessary to cybersecurity strategy. Starting in the
protect against and respond to cyber threats. diligence process, we take a standardized IMPLEMENTING
This key tenant of our technology strategy approach to assessing cyber risk in ONGOING IMPROVEMENT
is also embedded across multiple material- potential investments within our Global
issue categories in the SASB framework, Private Equity portfolio. Our findings We do not view cybersecurity as a one-
from data security to customer privacy and are fed into a value creation plan that time exercise and recognize that cyber
critical-incident risk management. provides a prioritization summary and threats will increase in frequency and
roadmap for addressing opportunities for complexity. To meet these challenges,
We’ve made cybersecurity a central improvement. To ensure that these efforts we have established a program for
focus of how we evaluate investments are having a material effect, several continuous improvement anchored by an
and support our portfolio companies in portfolio companies are regularly scored interconnected community of portfolio
developing their technology strategies. and benchmarked against their industry company cybersecurity professionals.
Our Global Investment Resources peers by an independent third party. At Resources available through our
(GIR) Technology team established a the portfolio level, these evaluations are program include leveraged agreements
cybersecurity platform for our portfolio combined with other key business metrics with providers of security products
companies that enhances their internal to provide an overall threat assessment and services, expert-led webinars on
capabilities with a global network that is leveraged for data-driven critical cyber issues, playbooks and
of experts, risk transfer tools, and decision-making. standardized guidance for cybersecurity
leveraged supplier agreements. Through strategy and architecture, a
continuous engagement, we provide collaboration platform for cybersecurity
portfolio companies with support to professionals, and an in-house
assess their level of cyber risk, protect PROTECTING CRITICAL ASSETS intelligence function for soliciting and
critical assets, and implement programs sharing best practices. Our offering in
for ongoing improvement. Occasionally, cyber incidents still occur this area continues to grow guided by
despite the measures in place to cyber experts from leading advisors
prevent them. We partner with leading and direct feedback from the portfolio
insurance carriers to provide our portfolio companies combatting threats daily.
ASSESSING CYBER RISK companies with best-in-class cyber
policies and resources to respond and
In a constantly evolving threat recover. We recognize that the ability
environment, understanding cyber risk is to quickly restore business operations
CARLYLE 2021 IMPACT REVIEW 20OUR IMPACT AT CARLYLE
IMPACT AT CARLYLE
C arlyle’s purpose is
to invest wisely and
800+ $580K+ 250+ 26
create value on behalf of
our investors, portfolio donations matched by Carlyle up to
$2,000 per employee in 2020
donated by Carlyle
employees in 2020
non-profit organizations recieved
donations from Carlyle in 2020
employees have been hired through
Carlyle’s partnership with Year Up
companies, and the
communities we serve.
In addition to capital raised and donated 5 LUXEMBOURG Holiday food and
by our employees for COVID-19 relief efforts toy drives.
profiled in last year’s Impact Review and
the work done in partnership with our 6 BEIJING & SHANGHAI Fundraisers
portfolio companies to provide support in to buy hand wash for Tibetan children
local communities during the pandemic, we during the pandemic.
donated more than $580,000 to over 250
non-profit organizations during the pandemic. 7 TOKYO Junior Achievement and
Carlyle matched over 800 of these donations Learning for All collaboration to provide
up to $2,000 in philanthropic gifts to educational services to low-income
charitable organizations per employee each families; Food drive and online charity run.
year under our corporate matching policy. We
also instituted a special program to provide 8 GLOBAL Virtual volunteer
an additional $1,000 in matching funds for workshops with Rumie in Washington,
each employee for donations to a set of social DC, New York, London, Miami, and Los
justice and criminal reform non-profits in Angeles. 8 4
response to recent events. 2 8 5
We furthered our partnership with Year 1 8 6
Our employees also participated in a variety Up, an organization that provides young 7
of volunteer activities across our global adults from underserved communities 8 6
8
offices, including: with the skills, experience, and support
3
to help reach their full potential
1 WASHINGTON, DC Community of Hope through professional careers and higher
back-to-school drive and a holiday toy education. Carlyle has provided more
drive for Boys & Girls Club than a hundred Year Up internships
of Greater Washington, DC. since 2007. While this partnership
originated with our Global Technology &
2 NEW YORK Holiday toy drive to Solutions (GTS) team, Carlyle expanded
support the students at Carter G. the internship program to additional
Woodson School in Brooklyn, NY. teams in 2018. As of 2020, 38 employees
have been hired full-time or brought
3 HONG KONG Junior Achievement on in extended contract positions at
virtual volunteer workshop. Carlyle through the Year Up partnership.
4 LONDON Fundraisers for multiple
organizations and virtual tutoring for students.
CARLYLE 2021 IMPACT REVIEW 21OUR IMPACT AT CARLYLE
CARLYLE’S ANNUAL
SUSTAINABILITY WORKSHOP
O ur ESG and Impact team’s strategy includes
building connectivity across our portfolio
companies and sharing best practices and collaborative
problem-solving techniques.
In April 2021, we hosted our Annual regulatory landscape, climate strategy
Sustainability Workshop and welcomed development, energy management,
more than 60 guests from over 30 sustainability strategy talent and
portfolio companies. Our virtual format organization performance, and board-
allowed us to host the event with a larger level ESG competencies. Speakers included
reach and include companies from across our Chief DEI Officer Kara Helander, Chief
the globe. The workshop covered some Performance Officer Mindy Mackenzie,
of the most pressing ESG topics facing Board of Directors member Janet Hill, as
companies today such as Diversity, Equity, well as external partners such as Business
and Inclusion (DEI), the evolving ESG for Social Responsibility, Ropes & Gray,
and Latham & Watkins.
The event served as an opportunity to
discuss a broad range of ESG topics, but
60+
also spurred specific value creation work
for our portfolio companies. For example,
following the workshop our team started
to work with a portfolio company in
attendees at the the shipping industry to define a robust
Sustainability Workshop sustainability strategy as they face the
material impacts of climate change on
their business, and a rising influx of ESG
questions from their stakeholders.
30+
portfolio companies attended the
Sustainability Workshop
CARLYLE 2021 IMPACT REVIEW 22SECTION SEVEN
Portfolio
Company Case
Studies
WE HIGHLIGHT SOME OF THE RESULTS OUR
PORTFOLIO COMPANIES HAVE ACHIEVED ACROSS
THE KEY DIMENSIONS OF IMPACT AT CARLYLE.
CARLYLE 2021 IMPACT REVIEW 23AMP ENERGY
CLIMATE RESILIENCE
Amp Energy
Amp is a global energy transition
platform that develops, builds, owns and
operates renewable energy and battery
storage projects, in addition to serving
as a disruptive grid-edge technology
platform, reimagining the future of the
grid. Amp has become one of the leading
global renewables companies having
successfully developed over 1.8 gigawatts
of distributed and utility-scale renewable
generation, hybrid generation plus
storage, and standalone battery storage
projects around the world.
Sector
RENEWABLE AND SUSTAINABLE ENERGY
Region Acquisition Date
NORTH AMERICA DECEMBER 2020
Lead Fund GLOBAL INFRASTRUCTURE
OPPORTUNITY FUND AND RENEWABLE &
SUSTAINABLE ENERGY FUND
CARLYLE 2021 IMPACT REVIEW 24AMP ENERGY
AMP ENERGY 2020 METRICS
C limate change is one of the
most pressing issues of our time,
state-of-the-art smart transformer
that enables real-time autonomous
games and trivia to serve as a
networking and socializing space
192,551 247 MW
creating unprecedented risks as well management and optimized dispatch for employees.
as opportunities for businesses across of all forms of distributed generation
all industries. As a firm, we believe that and loads across the grid. RSEF and Seeing the impact of COVID in the
MTCO2e
better understanding and managing CGI’s investment will help catalyze communities in which Amp operates, total installed capacity
these emerging risks and opportunities is the continued rapid growth of both during the end-of-year 2020
integral to creating long-term value for Amp’s asset base and Amp X, within its holiday season, Amp supported
our investors and shareholders. As a core core markets of North America, Japan, three organizations operating in the
199 MW
CO2e averted from the grid
pillar of our firmwide strategy on climate Australia, Spain, and the UK. community:
change, we launched our Renewable
and Sustainable Energy Fund (RSEF) to Amp’s core strategy–to develop, own FRED VICTOR, HOMELESS SHELTER
This is equivalent to... capture the opportunities created by and operate, global solar and wind In-kind food and clothing donations new installed capacity
212,823,442
the energy transition and commit to power generation assets and associated collected from Amp employees and a
invest globally in the renewable and utility scale battery energy storage cash donation of $10,000.
sustainable resources sector. systems (BESS)–is consistent with RSEF’s
58
pounds of coal burned
overarching impact thesis. BESS helps HORIZONS FOR YOUTH, YOUTH
The RSEF team is focused on identifying mitigate some of the existing constraints SHELTER Amp provided a $5,000
21,666,592
investment opportunities where a for large-scale deployment of renewables, cash donation and $5,000 in public
successful financial outcome is convergent allowing greater penetration of solar transportation cards. full-time jobs created
with a successful climate outcome: the and wind electricity on the grid, and a
gallons of gasoline consumed
more renewable energy and storage reduction in overall carbon emissions. SECOND HARVEST FOOD RESCUE
projects successfully developed and For example, BESS in conjunction with AND DELIVERY Amp purchased turkeys
445,796
operationalized, the more megawatt Amp X’s autonomous platform solution for 400 families for the end-of-year
hours (MWh) of clean energy generated can be used to store excess electricity festivities.
for the grid, and the more greenhouse and bridge intermittency issues inherent
barrels of oil consumed
gas (GHG) emissions avoided from to renewable power sources and enable
carbon-intensive energy sources. connectivity to grids that would otherwise
41,876
vehicles driven for one year
In 2020, RSEF announced a $47 million
strategic growth investment in Amp
be inaccessible.
Energy as part of Carlyle’s total
$374 million commitment to Amp, an COVID-19 RESPONSE
34,975
homes’ electricity use for one year
international renewables development
and energy transition company. Amp’s
core business is to develop, build, own,
In April 2020, Amp introduced
Employee Health & Wellness Benefits
and operate renewable energy and to assist with the physical, mental and
battery storage projects globally. general wellbeing challenges caused
by the COVID-19 global pandemic. An
Since 2009, Amp Energy has successfully allowance of 100 CAD per month was
249,222 developed over 1.8 gigawatts of
distributed and utility-scale renewable
generation projects, hybrid generation
allocated to all members of the team
globally, with a bonus of three months
upfront to be used for purchasing
MWh total energy generated
plus storage projects, and stand-alone
battery storage projects around the
world. Amp Energy’s proprietary digital
energy platform, Amp X, also provides
home fitness equipment. The allowance
continues to date and can be used for
health and wellness-related activities
at the employee’s discretion. At the
a diverse portfolio of disruptive and same time, Amp also introduced Virtual
interoperable solutions, including a Thursday meetings with scheduled
CARLYLE 2021 IMPACT REVIEW 25AMP ENERGY
PROJECT SPOTLIGHT:
NEMAIAH VALLEY
Nemaiah Valley is a remote
community located 250km north of
Vancouver and approximately 100km
from the nearest electricity grid.
250kW
solar photovoltaic (PV) system
A centralized diesel Genset house installed in March 2021
generator is the main electricity
source for the community, which
consists of 74 active residents
and a commercial/administrative
subdivision zone located in the
50%
center of the valley.
In 2015, the First Nation community
contacted Amp to explore ways of
developing a micro-grid on-site to reduction in Nemaiah Valley’s
reduce their diesel dependency. diesel dependency
Upon extensive due diligence, Amp
determined that a commercial
arrangement was not feasible
with the community. Amp, however,
decided to provide pro bono support
for the development of the micro- “This transaction
grid, bringing on board additional demonstrates our continued
development partners, acting as
their Engineering, Procurement and focus on identifying and
Construction (EPC) manager and executing upon attractive
supporting submissions for grants
and debt.
investment opportunities
such as solar projects and
In March 2021, the micro-grid system battery storage technologies
became operational, consisting of
a 250kW solar photovoltaic (PV) around the world that are
system. The micro-grid reduces the being propelled by the
community’s dependency on diesel by
over 50%, or by roughly 150 liters of energy transition.”
diesel fuel daily.
POOJA GOYAL
Co-Head of Carlyle
Infrastructure Group Nemaiah
Valley
100km from the
nearest electricity grid
CARLYLE 2021 IMPACT REVIEW 26DEPT
STRONGER COMMUNITIES,
ENGAGED EMPLOYEES
Dept
Based in Amsterdam, Dept is an award-
winning international agency with over 1,500
experienced thinkers and makers in 13 countries
across Europe and the Americas. One agency
uniting creativity, technology, and data.
Sector TECHNOLOGY AND
Region EUROPE
BUSINESS SERVICES
Acquisition Date JANUARY 2020
Funds CARLYLE EUROPE TECHNOLOGY
PARTNERS IV AND CARLYLE EUROPE PARTNERS V
BETTER BUSINESSES | BETTER RESULTS:
BECOMING A CERTIFIED B CORPORATION
MEGAN STARR DIMI ALBERS
Global Head Chief Executive
of Impact at Carlyle Officer at Dept
A Conversation with Megan Starr, Global Head of Impact at Carlyle,
and Dimi Albers, CEO at Dept.
Listen to a podcast about the why of Dept’s sustainability strategy
and in particular, why they focused on B Corp certification. Megan
Starr and Dimi Albers discuss the results a business can expect from
obtaining B Corp certification and our impact through partnership.
CARLYLE 2021 IMPACT REVIEW 27LIBERTY TIRE RECYCLING
SUSTAINABLE GROWTH
Liberty Tire
Recycling
Liberty Tire Recycling is the premier
provider of tire recycling services, based in
the United States. By reclaiming more than
33% of the nation’s discarded tires, Liberty
Tire annually transforms more than 190
million tires per year into raw materials for
smart, sustainable products that improve
people’s lives.
Sector INDUSTRIAL Region NORTH AMERICA
Acquisition Date DECEMBER 2017
Exited 2021
Lead Fund CARLYLE STRATEGIC PARTNERS IV
CARLYLE 2021 IMPACT REVIEW 28LIBERTY TIRE RECYCLING
R esource efficiency and the circular
economy—designing out waste and
keeping products and materials in the
As a first step, LTR and Carlyle developed
an Impact Opportunities Assessment with
the support of Bridge House Advisors, an
Ultimately, the quantification of
environmental impacts was an important
part of the sale process.
“By working with the Carlyle
ESG and Impact team and
value chain through multiple use cycles—are ESG and sustainability advisory firm who Bridge House Advisors, we
concepts that have surged to the forefront specializes in the measurement of impact. With an improved understanding of its
were able to successfully
of sustainability discussions. The challenge
to implementing these concepts, however,
The goal of the assessment was to
define the company’s impact pathways,
operational and product level footprint,
LTR utilized the findings to enhance its position Liberty Tire as a 190MN+
has been finding ways to profitably recycle and then determine and measure overall sustainability strategy. Carlyle leading ESG platform able to
and reuse a broad range of goods. The performance on key, material ESG and collaborated with a cross-functional LTR
ability to successfully implement this impact metrics to better understand the team to identify long-term sustainability divert tire waste from landfills 135MN+
concept was a key component of Carlyle’s operational and product environmental objectives and develop a renewed and produce higher value
investment thesis when we acquired Liberty footprint. This data provided three main corporate level sustainability vision. This
Tire Recycling (LTR) in 2017, and a significant benefits to the company: effort enabled the company to clarify key beneficially reusable products.
part of our sale of the business to Energy focus areas and ensure alignment with That positioning was key to our
Capital Partners, completed earlier this year. Identified opportunities to reduce evolving customer expectations.
carbon emissions and energy usage;
successful sale of the business.”
LTR was a premier provider of tire LTR CEO Thomas Womble believes
recycling services in the United States Enabled LTR to better articulate the that “while sustainability has always EVAN MIDDLETON
and Canada. With innovative tools, sustainable value proposition of its been paramount to us, the partnership Co-Head of North America for
technologies, and processes, LTR was products and services; and with Carlyle has helped the firm to Carlyle Strategic Partners 2019 2020
dedicated to finding new and better employ a more comprehensive approach
ways to reclaim, recycle, and reuse scrap Helped LTR address customer inquiries on with the recognition that going forward,
tires for eco-friendly products, keeping ESG, which are increasingly an important this will increasingly hold an even closer
billions of pounds of waste material out part of how customers select partners. tie to profitability.”
of landfills. LTR’s core business of recycling
tires was predicated on the sustainability While ESG has long been a part of
growth theme of resource efficiency. Under Carlyle’s investment due diligence and
Carlyle’s ownership, the company achieved BETTER RESULTS value creation over the hold period, its
meaningful impact by diverting waste from relevance continued to expand out to
landfills, collecting and recycling 190 million These results have the potential to other parts of the investment lifecycle—
tires per year, and transforming more generate cost savings and provide a more LTR is an example of how ESG growth
than three billion pounds of rubber into fulsome picture of the company’s overall themes are increasingly influencing deal
innovative, sustainable products. footprint—an important requirement of sourcing, and potential exit viability and
LTR’s strategic customers and potential pricing as well. Resource efficiency is
The company has increasingly buyers. The analysis revealed that: increasing investment efficiency.
received questions from customers to
demonstrate the performance of its ESG LTR recycled over 135,000,000 tires in
program, with a focus on sustainable 2019 and over 190,000,000 tires in 2020,
practices in the supply chain, operations, which helps preserve landfill capacity.
packaging, and product footprint. In
response, Carlyle’s ESG and Impact From 2019 to 2020, the application of
team partnered with LTR to enhance LTR’s Playground Mulch product helped
the company’s sustainability strategy avoid approximately 41 injuries due to
while quantifying the footprint of their falls from height.
products and operations, which we
believed would strengthen their core In 2020, the use or application of LTR’s
business and potentially increase the products (88% of total volume sold) avoided
company’s attractiveness to a wider almost 900,000 metric tons of CO2-e.
range of potential buyers.
CARLYLE 2021 IMPACT REVIEW 29NOVOLEX
CLIMATE RESILIENCE,
DIVERSE AND INCLUSIVE TEAMS
Novolex
Novolex is a leading manufacturer of
paper and plastic flexible packaging
products, primarily serving customers
in the food service, grocery, retail, and
commercial end markets.
Sector INDUSTRIAL Region NORTH AMERICA
Acquisition Date DECEMBER 2016
Lead Fund CARLYLE PARTNERS VI
CARLYLE 2021 IMPACT REVIEW 30You can also read
