Bonderman Builds His Green Team

Privcap: How did you become interested in environmental issues?

David Bonderman: When I was in college, I thought I wanted to be an archeologist. I got a job working in Southern Utah at the Museum of Northern Arizona, when the Glen Canyon Dam was being built, which gave me perspective on a lot of environmental issues. So my partner and I founded the firm with the notion that we didn’t want to do things that were degrading to the environment.

How did you go about building an ESG team within TPG Capital?

Bonderman: If you put someone in charge of something and it’s their task to succeed, you’ll find that you get results; whereas if no one has direct oversight, it will just get ignored.
So we decided that the right way to deal with ESG was to bring in someone who had the right kind of background. We recruited Ed Norton, who founded the Grand Canyon Trust and some national parks in China. He has been active in the environmental movement for about forty years.

We also hired senior advisor Beth Lowery who had been in the same position at General Motors. She’s part of the department’s mission to make sure that we pay attention to these sustainability issues.

Your firm’s ESG unit monitors the environmental impact of your firm’s investments or potential investments—but how do ESG initiatives enhance results for investors, portfolio companies and TPG Capital?

Bonderman: We examine the best practices that are adapted by various people from various companies. Obviously, what you do in your company may not apply to what I do in my company because we’re in different businesses or different geographies. But there’s a lot of transplanting of best practices and there are some things we bring to the party as well.

I think what’s most effective is having both these elements: where people are committed to doing the right thing, but can also identify when it’s financially viable. There’s the old belief that if you pay too much attention to responsible investing, you won’t be able to make any money. This is just dead wrong in most instances.

Can you discuss a portfolio company that clearly illustrates how ESG can improve operations and the bottom line?

Bonderman: Perhaps somewhat surprisingly, one of the leaders in this has been Caesars Entertainment. They’ve done a myriad of things, such as the conservation of electricity, water and dealing with waste. They had many of these programs in place, or were working on them, before we came into the picture. But tracking results more closely helped us realize total savings in the $20 million range.

TPG invests all over the world, including some frontier markets in Asia.  When investing in these developing markets, are there different priorities in terms of responsible investing?

Bonderman: I think there are different concerns in these markets. We’ve been talking about environmental initiatives, and that gets bandied in the ESG phrase, which is ‘environment, social and governance.’ I think the social aspect of it is probably more important in some of these frontier markets.

If you look at the garment building collapse in Bangladesh and similar tragedies, there’s a social component. It calls for regulatory regimes in place that ensure buildings are built with permits, so that they won’t fall down and kill over a thousand workers.

Do you think ESG will become more significant to the private equity industry?

Bonderman: I think the importance—or the popularity at least—of ESG is on the way up, not on the way down.  I think you will see more of it.  But I think you have to be careful that ESG just doesn’t become another one of these ‘check the box’ things, like confirming a person got the right degree. It has to be more than checking the box. Instead, it has to be a real function.

And our experience has been that these programs pretty much pay for themselves and then some. ■

View the full Privcap interview here: