Advancing the art of what’s possible
CORPORATE SUSTAINABILITY REPORT 2019

1

EMPLOYEE ENGAGEMENT
We see opportunity where innovation

CARBON NEUTRALITY

and sustainable practices intersect.

A COMMITMENT TO DIVERSITY

Pursuing these new avenues is one

GOVERNANCE AND TRANSPARENCY

sustainability

way we’re creating value in meetingcustomers’ needs while striving to

MINORITY-OWNEDBUSINESSOPPORTUNITIES

be good corporate citizens.

MEDICAL THERAPIESPHILANTHROPY

NEXT GENERATION PACKAGING AND PLASTICS

innovation
SUSTAINABLE PLATING PROCESSESELECTRIC TRUCK POWERTRAINS
2

NEW USE FOR TIRE SCRAPSCONTENTS
CO-CEOS LETTER p2
CARLYLE TODAY p4
OUR SUSTAINABILITY STRATEGY p5
BUILDING ESG GOVERNANCE AND CAPABILITIES p6
CREATING VALUE FOR INVESTORS p18
LEADING BY EXAMPLE IN ESG PRACTICES p30

ESG

happier customers
top line growth
and a better world

The results:1

TO OUR INVESTORS, OUR PARTNERS AND OUR COMMUNITIESCarlyle continues to be a leader among our peers in sustainability. After becoming the first major
private investment firm to operate on a carbon-neutral basis in 2018, we recorded a second
consecutive year with net zero emissions, in part through the renovation of our Washington, DC
headquarters, which you can read about on page 31.
But at Carlyle, our commitment to strengthening our environmental, social and governance (ESG)
impact goes beyond the firm’s carbon footprint. It means embedding these values in our culture
in ways that foster innovation and over time, seek to increase returns. That includes making
sustainability a part of our investment process, helping us identify innovators who create value
through commercially successful and sustainable solutions.
GLENN A. YOUNGKIN
Co-Chief Executive Officer

KEWSONG LEE
Co-Chief Executive Officer

Across our portfolio, Carlyle supports the scaling of innovations designed to address specificsustainability challenges. Examples include our investments in companies such as Jeanologia(page 21), which has reengineered denim to lessen its environmental impact, or Logoplaste(page 22), which has designed new bottling systems to help decrease plastic waste. Our
portfolio companies NOSA and PA Consulting are helping firms solve environmental healthand safety issues, with the additional benefit of keeping Carlyle’s platform up to date on bestpractices from South Africa to Europe.
Our investments also support some of the richest veins of sustainable innovation at our oldest,
most traditional portfolio companies. With Carlyle’s help, AxleTech (page 9) and Atotech (page 19),
have been able to leverage their deep sector expertise and experience to develop sustainable
solutions that meet the changing needs of the markets in which they operate.
We believe that a diverse team, bringing multiple perspectives, is critical to identifying uniqueinvestment opportunities. Our effort to build this diverse team is happening at all levels. We havehired several experts (profiled on pages 16–17) to contribute their specialized ESG knowledge2to our investment discussions. They oversee business-critical areas like human performance,
information technology and security, diversity and inclusion, and of course, sustainability. Bybringing this expertise in-house, we have created a knowledge base that we believe gives ourinvestment teams a valuable edge.

Highlights

Firm-wide, we are proud of our achievements in diversity and inclusion. For the past six years our
Corporate Private Equity (CPE) Associate classes have been more than 50% diverse by gender orrace.* Women hold 23% of senior positions in the United States. But there’s more to be done
and the firm’s first-ever Chief Inclusion and Diversity Officer, Kara Helander, will lead the charge.
Read about her on page 32 of this year’s report. Unique partnerships (page 26) can also provide
another source of diverse viewpoints to strengthen our origination and ownership processes.
Innovative community partnerships in our investment in Terminal One at New York's JFK Airport
helped de-risk a major infrastructure project, and working with the International FinanceCorporation (IFC) to pilot a new tool for identifying energy efficiency features is intended to
improve operations in new warehouses in China.

• In the latest One Carlyle initiative, Ortho Clinical

We are grateful for the trust you place in us as stewards of your capital. Sustainable innovation
fostered by a diverse and inclusive culture remains an essential way in which we protect that capitalfrom risk. We hope this year’s report gets you excited about its potential for creating value andgenerating growth.

• We hired Kara Helander to be the firm’s first-everChief Inclusion and Diversity Officer (page 32).

Diagnostics hosted some of its fellow portfolio
companies to share ESG best practices at its Raritan,
New Jersey site with a six-acre solar farm (page 13).
• We backed electric trucking in a big way by investingin electric powertrains for trucks through AxleTech(page 9) and purchased carbon offsets to electrify
trucking rest stops (page 31).
• We invested $3.4 billion over the last 10 years incompanies that align with the United Nations (UN)
Sustainable Development Goals. We feature four suchcompanies this year: Jeanologia, Liberty Tire Recycling,
NOSA and Valcour Wind Energy.
• Women now manage $108.6 billion of our assets asfund or business unit heads or co-heads (page 35).
• We added 13 new value creation case studies to our

Kewsong Lee
Co-Chief Executive Officer

Glenn A. Youngkin
Co-Chief Executive Officer*Diversity by Gender and Race includes Females, American Indian/Alaskan Native, Blacks, Hispanics, Native Hawaiian, Other and Two or more Races

library, bringing our total to 60 since 2015.

33

Carlyle today

Invest wisely and create value
These five words sum up everything Carlyle has stood for since
our founding more than 30 years ago. Today we are a global
investment firm with $222 billion of assets under management
across 343 investment vehicles.

1,975 investors from 90 countries
Our investors range from public and private pension funds to university endowments,and sovereign wealth funds to unions and corporations. Pension funds are our largest
group of investors. Their key stakeholders are pensioners who rely on strong, longterm investment performance.

$222 billion
Assets Under Management

One Carlyle in 33 offices and 20 countries
More than 1,700 Carlyle professionals work together seamlessly across funds, industries
and geographies to deliver the knowledge and resources required to invest wisely andcreate value for our investors. We call our collaborative spirit One Carlyle.

4
Business Segments

Portfolio companies employ 650,000 people worldwide
Across our Corporate Private Equity and Real Assets segments, we have investments inmore than 275 portfolio companies that employ more than 650,000 people worldwide.

10
Core Industries

This large employee base is often a critical force in advancing sustainability initiatives.

Support for economic growth in local communities“Over the past decade, ‘growth’ investments, including direct investments into founderowned private businesses, have come to account for a much larger share of Carlyle’s
corporate private equity portfolio,” says Jason Thomas, Director of Research at Carlyle.
“The returns on these investments often depend much less on cost reductions than they doon sustained growth in portfolio company sales and employment.”

All data as of March 31, 2019.

4

The three goals guiding our sustainability strategy
Every day we see how expertise in ESG issues increasingly provides important data to assess investment
decisions as sustainability influences portfolio company customer preferences, enters into competitive
dynamics, brings new ideas for operational efficiency and helps engage employees.
At Carlyle, we focus on three goals to better integrate ESG risks and opportunities in our investment process
and within our own firm:

2

1

Build strong ESG governance and capabilities
We work to ensure our investment process formally integrates ESG expertiseand ESG issues are monitored at the board level.

Create value for investors
As part of the investment process, we evaluate risks and seek opportunities to create value throughESG. Companies are developing innovative solutions that deliver new environmental or societal
benefits while seeking to create tremendous value.

3

Lead by example among private investment firms
We particularly focus on improving our own practices in the areas of diversity
and inclusion and management of Carlyle's carbon footprint.

5

1

BUILD STRONG ESG GOVERNANCE
AND CAPABILITIES
Since 2008, we have worked to continuously strengthen
governance and transparency, aligning the interestsof our investors, portfolio companies and investment
professionals. Good governance processes enable Carlyle
to monitor current and emerging risks and provide
investors with the transparency they require. Ensuringthat our investment process integrates ESG considerations
equips us to better identify and monitor the most relevant
ESG issues and most significant market trends—reducing
risk and creating value.

6

B U I L D I N G E SG GOV ER N A N CE A N D C A PA B I L I T I E S

Integrating ESG considerations into each phase of our investment process
We’ve made significant strides in embedding ESG considerations into our investment process to reduce risk anddrive growth across our asset classes. Our deeper integration of ESG issues and trends also brings new expertiseto help teams understand early on in the process the evolving landscape of portfolio company customer andother stakeholder expectations, which can identify emerging risks and produce new opportunities. Building from
our Guidelines for Responsible Investment established in 2008, we now follow a systematic process that includes
integration at each phase:

Due diligence Strong ESG governance starts with a detailed assessment of risks and opportunities indue diligence. Prior to investment committee reviews, each deal is required to identify material ESG risks andopportunities and outline how they may be mitigated or managed. Expertise is highly valued, and we benefit

OUR POLICY: Carlyle Guidelines
for Responsible Investment

from teams’ often deep experience with a sector. We frequently align due diligence conversations aroundOur 2008 policy draws on international

the Sustainability Accounting Standards Board (SASB) standards. Deal teams access additional input from ourstandards, including the UN Principles

team of internal leaders on ESG issues such as environmental risks, workforce diversity or data privacy andfor Responsible Investment and the UN

security. Our “investment transaction dashboard” systematically catches gaps in ESG information that must be

Global Compact—and can be found ataddressed before meeting with the investment committee. Our sustainability team estimates that instances ofwww.carlyle.com/citizenship. In 2018,

missing ESG information have steadily decreased in the past five years.

97% of boards in our private equity
segment reviewed their operations in

Ownership Our growing expertise on a variety of ESG issues now enables us to routinely create more top

accordance with our policy.

line value from understanding and capitalizing on ESG trends in the marketplace. Our deal teams’ understandingof material risks has expanded through support from sustainability experts, whether from our own team oroutside the company. Pages 16–17 describe the growth in capabilities that supports our investment professionals
and enables earlier implementation of risk management strategies.
In particular, we see two pivotal roles for Carlyle investment professionals in their work as portfolio company
board members bringing sustainability perspectives to the table:• Strategic decision-making, including capital investments (research and development, acquisitions,etc.), new hires, customer engagement and response to incidents—all of which can add significant value
to an investment if the right ESG expertise is available and connected to management. Our AxleTech
example on page 9 illustrates how key board decisions helped management take advantage of new top
line sustainability opportunities that are sometimes not identified during due diligence.

7

B U I L D I N G E SG GOV ER N A N CE A N D C A PA B I L I T I E S• Systematic monitoring of ESG issues, increasingly through Key Performance Indicators (KPIs), gives
Carlyle the ability to not only stay abreast of key ESG developments but also drive new conversations
among all board members, including independent board members. Several years of data from our Carlyle

Our sustainability teamconsistently challenges ourdeal teams to understand theintersection between ESG
issues and core componentsof the business.

Europe Partners Fund shows the breadth and depth of data that we now collect; our team of ESG experts
helps teams uncover the insights these KPIs provide (page 10).

Exit As investments reach fruition, Carlyle now has a growing body of case studies where teams have realized
the value of sustainability initiatives. Our newest AxleTech example highlights the value at exit of sustainabilitydriven innovations.
Whatever investment platform our teams pursue, our sustainability team consistently challenges our deal teams
to understand the intersection between ESG issues and core components of a portfolio company’s business,
including customer trends, input costs, competition and a strong and inclusive workforce. Therefore, when ESG
initiatives create tangible value, most often it aligns with one or more of these value creation drivers:

VALUE CREATION DRIVERS

8

Customer

Operational

Brand

Workforce

Satisfaction

Efficiency

EquityStrengthVALUE DRIVERS

A strategic board decision finds a new growth edge
In-axle electric powertrain systems are setting new efficiency standards while preserving
local air quality and reducing greenhouse gas emissions.
Soon after acquiring AxleTech International for a second time in January 2015, Carlyle supported its pivot froma traditional 100-year old company to a diversified business that is also a technology innovator in the electricvehicle space. AxleTech is a premier provider of powertrain systems and components for heavy-duty commercial
and defense vehicles. With Carlyle’s support, AxleTech entered into the design, engineering and manufacturingof efficient powertrain systems for on-highway electric vehicles—including terminal tractors, lift trucks and

INDUSTRY Transportationtransit buses.

REGION

United States

Bill Gryzenia, CEO of AxleTech, says, “Carlyle’s team had the judgement to allow us to invest in a related but

FUND

Carlyle U.S. Equity Opportunity Fund

new area for us, signing off on hires of new types of engineers and software experts. The board’s calculated

INVESTED January 2015

risk is paying off big. After first identifying electric vehicles as an opportunity for growth four years ago,
AxleTech projects sales to double in the next 24 to 36 months. Numerous customers asked us to work on

STATUS

Current

electrified axle solutions.”
AxleTech developed “power-agnostic” in-axle electrification technology—full battery electric, hydrogen fuelcells, range-extending technology or even hybrids—to compete with fossil fuel vehicles and replace diesel buseswith compact and powerful systems. Instead of the conventional longitudinal drivetrain platform, AxleTech
designed its electric powertrain technology to improve performance, efficiency, cost, maintenance support
and packaging. AxleTech’s e-axle solution offers a ~6% efficiency loss compared to the conventional ~10%
efficiency loss.
Renowned engineering talent and strategic partnerships with key industry leaders have accelerated innovation

15

and growth. Adam Glucksman, Carlyle Managing Director, says, “The electric vehicle industry is burgeoning,

15 electric vehicle patents
filed by AxleTech in justthe last 18 months—more
patents filed than in thelast 10 years

propelled by more robust technology and infrastructure and an enabling regulatory environment. AxleTech
customers wanted to be a part of this trend, to improve their sustainability, lower their operating costs andmaximize electric vehicle efficiency.”
After several years of investment and innovation, AxleTech sold the Electric Vehicle Systems unit for $125 million
against about $20 million in capital spent on the project.

1,100+

1,100+ miles traveledon a single charge using
the powertrain, setting aworld record

9B U I L D I N G E SG GOV ER N A N CE A N D C A PA B I L I T I E S

How Is ESG data used?
As described on page 8, ESG KPIs provide key information forCarlyle Europe Partners’ leadership in developing ESG KPIs is in its third year. Our investor template includes 19

a board of directors to monitor challenges and opportunities,

companies, and our investors, investment professionals and management teams use this data.

assess performance relative to previous years and compare
data across the portfolio where appropriate. More specifically,
we increasingly use these indicators to help improve our:What are we tracking? We develop company-specific KPIs based on material issues for each relevant sector andgeography, but our data shows that ESG KPIs typically track goals and progress in seven core areas:
1. E nvironmental footprint of operations(air, water, waste, energy metrics)

4. Workforce health and safety

lessons learned from other companies can be brought to

2. Product stewardship (metrics on design
improvements or product innovations)

6. E mployee satisfaction (metrics on
wages and measures of engagement)

the management team. For example, packaging innovator

3. Supply chain management

7. Data security

Troubleshooting If we see employee turnover above agoal level at Comdata, one of our telecom companies,

5. Workforce diversity

Novolex (page 23) found that offering part-time employment
in plants located in low-unemployment regions reduced theirMaterial KPI issues reported by company

turnover rates and facilitated recruitment.
Identification of cross-cutting issues Multiple companies

COMPANY (INDUSTRY)ENVIRONMENTAL
FOOTPRINT

PRODUCTSTEWARDSHIP

SUPPLYCHAIN

HEALTH/SAFETY

DIVERSITY

12/19

10/19

11/19

12/19

5/19

today face challenges in obtaining recycled materials tomeet customers’ specifications—whether sourcing recycled

COMPANY A (AEROSPACE)

polyethylene terephthalate (PET) at packaging developer

COMPANY B (APPAREL)

Logoplaste (page 22) or finding recycled fiber for Dubl Life®

COMPANY C (APPAREL)bag products (page 23).

COMPANY D (APPAREL)

LABOR
PRACTICES/ENGAGEMENTDATASECURITY/PRIVACYCOMPANY E (BUSINESS SERVICES)

Strategic purchasing Several companies in our portfolio

COMPANY F (BUSINESS SERVICES)

purchased a high percentage, if not 100%, certified palm oil.

COMPANY G (BUSINESS SERVICES)

Carlyle can provide support on cost and availability data for

COMPANY H (CHEMICALS)

this raw material input.

COMPANY I (CHEMICALS)

Marketing and communications ESG KPIs provide newdata resources and information helpful to communications

COMPANY K (FOOD & BEVERAGE)COMPANY L (FOOD & BEVERAGE)

and marketing teams, whether for company marketing

COMPANY M (MANUFACTURING)

materials, sales team training or employee communications.

COMPANY N (MANUFACTURING)

Assessment of overall strengths and weaknesses
KPIs provide measurable ESG performance indicators forour portfolio at scale, across sectors, regions, sizes andcompany maturity.

10
10

COMPANY J (FOOD & BEVERAGE)COMPANY O (MANUFACTURING)COMPANY P (MANUFACTURING)COMPANY Q (PACKAGING)
COMPANY R (PACKAGING)
COMPANY S (TRAVEL & LEISURE)NUMBER REPORTING OF 19 TOTAL

Presented for illustrative purposes only

9/19

3/19

VALUE DRIVERS

Improving health and safety performance
Professional services help businesses continually assess and improve their occupational
health, safety and environmental risk and compliance management systems.
NOSA helps companies ensure the safety of their employees, contractors, customers and the environment.
The company has been instrumental in reducing workplace-related injury and fatality rates in companies
across various industries in South Africa since 1965 and China since 2005. Carlyle acquired NOSA in 2018with plans to support NOSA’s digital transformation and international expansion.
With established subject-matter expertise in occupational health, safety and environmental risk management
NOSA offers companies a comprehensive suite of consulting, audit, training and testing services as single or
integrated solutions.
NOSA’s innovative and proprietary safety framework, the NOSA Integrated Five Star System, incorporates

INDUSTRY Technology & Business Services

key elements of ISO 45001 and ISO 14001 and rates customers’ safety performance from one to five stars.

REGIONSub-Saharan Africa

FUND

Carlyle Sub-Saharan Africa Fund

Karl Campbell, CEO of Nosa, says: “Customers appreciate the system’s effectiveness; we recently had a large
mining customer re-engage with NOSA. They used our system successfully until they were acquired by a U.S.
firm that wanted to apply ISO standards to the mine. The mine’s safety record actually went backward. Now

INVESTED April 2018that they have re-embraced NOSA, we have seen a turnaround in incidents in that particular mine.”

STATUS

Current

Carlyle’s acquisition of NOSA sharpened the focus on sustainability within the business. One of the firststeps Carlyle took following the acquisition was to implement within the first 100 days broad-based black
economic empowerment (BBBEE) measures in line with legal requirements in South Africa and Carlyle’s
responsible investment guidelines. Such measures included the granting of a 25% ordinary shareholding
to an empowered staff trust*; increased and more targeted spending on corporate social responsibility,
skills and enterprise development; and a strong emphasis on diversity and employment equity in senior
management and board roles. The ongoing digital transformation in NOSA Training (move to e-learningfrom textbooks) and its back-office processes (move online from paper-based) are helping drastically reduce
paper usage at NOSA.
With Carlyle’s support and growth orientation, NOSA has undertaken significant capital investments since
2018 to strengthen its subject-matter expertise—namely industry-specific audit protocols and training
content—and upgrade its front- and back-end technology capabilities.
*Staff trust whose beneficiaries are NOSA employees from previously disadvantaged groups.

Reduced injury and fatality rates incompanies across five continents

BBBEE
Obtained broad-based black economic
empowerment (BBBEE) certification,and 25% of the equity in NOSA is now
allocated to black employees

11B U I L D I N G E SG GOV ER N A N CE A N D C A PA B I L I T I E S

How Carlyle adds ESG value
ESG considerations play a growing role in our investment

While backing strong ESG performers is a sound investment strategy, we aim to go further by providing

process and the operations of our portfolio companies,

a “Carlyle Edge” on sustainability issues, including in the following ways:

often sparking innovative new products and services.
As part of our investment process, our investment
professionals not only evaluate ESG risks, but increasingly
identify opportunities for growth driven by market trends
toward more sustainable products, services and companies.
During our ownership period, we support portfolio
company management teams’ efforts to create new, moresustainable products and services and develop strategic ESG
programs within their companies. Our ESG value drivers

Lending expertise on ESG issues
Carlyle brings world-class ESG expertise to its portfolio companies, starting with our Chief Sustainability Officer,
Jackie Roberts. Jackie, now in her sixth year at Carlyle, spent 20 years at the Environmental Defense Fund andholds a graduate degree in environmental management from Yale University. In addition to Jackie and thesustainability team, Carlyle maintains a network of preferred experts and consultants in all major ESG sub-fields,
including Gare Smith of Foley Hoag, LLP, an expert in human rights and labor law. These internal resources andexternal references allow our portfolio companies to better understand the nature and materiality of their ESG
issues and thus how to address them.

and case studies illustrate the range of opportunities forMarket intelligence and One Carlyle platform

enhancing value through sustainability-driven innovation.

With more than 275 portfolio companies across the world, Carlyle has a unique edge when it comes tounderstanding the ESG needs that companies face. From “early warning” watch lists of ingredients in consumer
products, to expectations of major buyers such as Walmart, to other portfolio companies’ experiences withsimilar issues, Carlyle offers insights to our portfolio companies that go far beyond their scale. This market
intelligence is key for identifying and developing sustainability solutions that can add value. The Carlyle portfolio
itself also offers products and services that can be shared across the platform to solve ESG issues, such as NOSA’s
health and safety audits and procedures (page 11).
Capital injection to catalyze ESG progress
Numerous ESG initiatives have attractive financial returns but require upfront capital to get the ball rolling.
Carlyle’s investment, and the resulting capital injection, can help our portfolio companies get over that hump.
One category of such projects are equipment upgrades, which typically make an operation more efficient froman environmental perspective in addition to serving a business imperative. In other cases, new personnel andexpertise is needed to generate value from ESG initiatives, and capital helps acquire that talent. Finally, as withmost of the case studies in this year’s report, Carlyle’s capital can fund research and development (R&D) toinnovate solutions for ESG problems that affect the company’s customers or operations.

12Carlyle portfolio companies share ESG successes
and challenges at sustainability roundtable
In January 2019, the Environmental, Health and Safety (EHS) team at Carlyle portfolio company Ortho
Diagnostics hosted a sustainability roundtable for fellow Carlyle portfolio companies at its Raritan, New Jersey
headquarters. Companies in attendance included Albany Molecular Research Inc., Arctic Ice and Novolex.
Carlyle’s Chief Sustainability Officer Jackie Roberts and Ortho’s Raritan EHS Manager Tim Goddeyne welcomed
all attendees for a productive day during which the Ortho EHS team shared sustainability and safety innovations,lessons learned and best practices. As a carve-out from Johnson & Johnson, an original member of the Dow
Jones Sustainability Index in 2010, Ortho is one of our most mature companies on sustainability initiatives.
The portfolio company attendees, who each oversee sustainability in their roles, visited Ortho’s six-acre solar
farm. Then they toured Ortho’s manufacturing operations, which produce the company’s dry VITROS® systemthat, unlike traditional wet chemistry systems, does not require water or drains to operate.

“The roundtable provided aplatform where we could
learn from each other anddiscuss what works and,equally important, what
does not work.”
TIM GODDEYNE
ORTHO’S RARITAN EHS MANAGER
13

B U I L D I N G E SG GOV ER N A N CE A N D C A PA B I L I T I E S

Expanding capabilities to invest in renewables and sustainable energy
The transition to a low carbon will require massive investment in renewable and sustainable energy
infrastructure, since renewables now represent a supermajority of global additions to power generation
capacity. As such, the rapidly growing renewables and sustainable energy sector represents a pivotal market
trend, and Carlyle has responded by deepening and broadening our existing renewables investing experience.
This past year, Carlyle invested in building a top-tier team with deep investment and operational experience,
including senior professionals who focus on investing capital or operating assets in the renewables sector
on a dedicated basis. As announced in April 2019, Pooja Goyal will join Carlyle to lead our new Renewable
and Sustainable Energy (RSEF) team, bringing nearly 15 years of experience investing in the renewables andsustainable resources sector.
While the RSEF team is comprised of new team members bringing deep sector knowledge and experience, itwill also draw on insights from Carlyle’s existing power, infrastructure and hydrocarbon businesses. Carlyle’s
diversified $27 billion global energy platform operates more than 95 portfolio companies across 31 countries
and six continents.*
Our RSEF investment team has experience sourcing verifiable projects and creating robust value creation plans.
Under Pooja’s leadership, our investment team will work in close coordination with the broader U.S. andinternational energy and power teams, to source, do due diligence, manage assets and optimize investments.
As shown by our Valcour case study on page 15, our experience spans the full One Carlyle global platform,
including Carlyle Power Partners.
We believe our global network of relationships, the firm’s deep energy sector expertise and a new teamwith complementary experience will create unparalleled capabilities that can seamlessly plug into Carlyle’s
expansive platform.

14*Data as of March 31, 2019

VALUE DRIVERS

Helping New York State reach its renewable energy goals
More than 400 turbines on six farms across the state generate power with wind.
New York’s renewable energy policy requires that 50% of the state’s electricity come from renewable resourcesby 2030. Last year Carlyle made a major investment in renewable energy to help the state achieve this goal.
The acquisition of the largest operating wind platform in New York, renamed Valcour Wind Energy, represents

VALCOUR WIND ENERGY

about 29% of the state’s annual wind power production. It comprises 408 turbines across six independent windfarms in Northern and Western New York.
Carlyle acquired the 612 megawatts (MW) operating wind generation portfolio—its first wind investment—from Noble Environmental Power through Carlyle Power Partners II (CPP II), which invests in power generation

INDUSTRY Energy & Powerand related assets, primarily in North America. This portfolio of assets is 100% owned by CPP II and operated

REGION

United States

by Cogentrix Energy Power Management, Carlyle’s dedicated power generation management platform and the

FUND

Carlyle Power Partners II

technical and operating platform for power generation assets.
J.B. Oldenburg, Carlyle Vice President, says Carlyle began working to optimize the Valcour Wind Energy platform

INVESTED December 2018
STATUS

Current

soon after the acquisition was complete. “We worked closely with Cogentrix to identify opportunities to reduce
operating costs by up to 5% annually and optimize asset operating parameters to improve efficiency,” says J.B.
“With a series of planned upgrades we expect to extend the operational life and increase production of theassets.” Carlyle is also working to dissect historical wind data and other meteorological aspects in the region
to further optimize the wind farms. “This example shows how we are working to factor in changes in weather
patterns, climate risk and resiliency to continue to provide New York State with zero-carbon energy for an
extended period,” says J.B.
As part of the acquisition process, Carlyle worked with more than 450 land owners who lease land to Valcour
Wind Energy for the wind turbines to assure them that the transition from Noble to Carlyle ownership would
be smooth. “Community relations are very important to us,” says J.B. “The Cogentrix Energy team initiated aproactive outreach program, including town hall meetings with land owners and local recruiting events. We want
to align with the communities in which these assets operate to ensure the greatest return for all parties involved.”~29%

Produces about 29% of New
York’s wind power on anannual basis, representing thelargest operating wind platformin the state

612 MW
612 MW operating wind
generation portfolio

15

B U I L D I N G E SG GOV ER N A N CE A N D C A PA B I L I T I E SINNOVATING IN OUR INVESTMENT PROCESS:
SPECIFIC EXPERTISE WITHIN CARLYLE
During the last five years, we innovated our own investment process by integrating
new types of expertise in ESG issues. In 2014, Jackie Roberts became our Chief
Sustainability Officer, followed in quick succession by additional in-house experts
whose unique perspectives are incorporated into the investment process so thattoday’s investment discussions differ from those of even a few years ago.
JACKIE ROBERTS

Maximizing ESG opportunities

Sustainability
and ESG issues

Jackie Roberts originated the position of Chief Sustainability Officer to bring comprehensive
sustainability expertise into the investment process. “My responsibility is to bring my experience withenvironmental and social issues to support successful investments—which means that I support three
key constituencies: our investors, investment professionals and our portfolio companies,” Jackie says.
“Whether reducing risk or seeing new opportunities, my role is to help articulate how successfully
identifying and managing these issues builds portfolio company customer satisfaction, enhances

MIKE HAAS
Cyber security
and data privacy

brand value, creates operational efficiency or builds a top-tier workforce.”

Protecting data and privacy
Mike Haas, who began working for Carlyle in 2016, serves as the Chief Information Officer of ourfirm and our portfolio. He focuses on information technology and business process due diligenceand transitions across all business sectors, supporting cyber security and data privacy—which areconsidered ESG issues because of their social component. Mike says, “Cyber security is now astandard part of all diligence. Building our capabilities to address risk and remediation plans is partof our value creation program.”
For the last 12–18 months, Mike’s team assessed our portfolio companies and their progressagainst standards such as the ISO 27001 framework. All portfolio companies were asked tocomplete an independent third-party assessment of their current cyber risk profile and cybersecurity improvement program. Mike says, “We reviewed the output of the assessment with16

each portfolio company and helped ensure they put a strong improvement plan in place. Cyber
security threats continue to change so it is something you are never done with. Nobody has acompletely risk-free environment.”

Improving organizational performance
Mindy Mackenzie, Chief Performance Officer, spent her career helping build businesses and leaders
to be the best they can be. She now brings her unique brand of impact to our portfolio companies,
helping them maximize organizational, operational and leadership effectiveness. Mindy brings
insights around managerial strengths and weakness to our deal teams, infusing innovation into ourown investment process.

MINDY MACKENZIE
Organizational, operational
and leadership effectivenessMindy also developed a proprietary Organization Health Survey focused on private equity firms thatmeasures known drivers of performance to help optimize our portfolio companies’ performance.
“Companies everywhere administer organization surveys,” says Mindy. “We simplified the bestof what is in the marketplace and designed a solution that provides a holistic view on key issues
supporting or inhibiting performance.” Results can be used to design a customized action plan for
a company or establish a baseline for ongoing measurement and tracking.

Incorporating diversity and inclusion into the investment process
Kara Helander, who joined us as our first Chief Inclusion and Diversity Officer in October 2018,
defines diversity and inclusion as encompassing the meaningful differences that will enhance ourbusiness. “Our approach to diversity and inclusion is about opportunity,” she says. “That means
tapping the wide range of diverse perspectives, backgrounds, knowledge bases, interests andcultural identities at Carlyle to deliver exceptional performance to our investors and capitalize on
our greatest business opportunities.” Kara adds that being able to see opportunities and seize
them is fundamental to Carlyle’s success. “Teams that are diverse and inclusive view opportunities

KARA HELANDER
Diversity and inclusionfrom a variety of angles and use different models and approaches to assess them. The result isbetter decisions and better outcomes. That’s why we seek diversity within our own teams and at
our portfolio companies.”

17

2

CREATE VALUE FOR INVESTORS

Carlyle supports our portfolio companies in their journeys todevelop innovative strategies that create or improve value.
Increasingly, sustainability is the spark for innovations thatdrive improvements and growth for a company. Whether
creating environmental or social benefits, we most often seethat such innovations directly connect to four primary value
drivers (page 8). When innovations reflect the priorities of key“We recognized the power ofa trusted brand name ushering
in innovative technologies.”
PETE CLARE	
MANAGING DIRECTOR,
CO-CHIEF INVESTMENT OFFICER
AND CO-HEAD OF U.S. BUYOUT

18

stakeholders such as customers, employees and investors, thebusiness benefits become more obvious. These value creation
strategies come to life in our library of case studies, with
examples from a variety of funds, geographies and sectors.

CR E AT I N G VA LU E F O R I N V E S TO R S
VALUE DRIVERS

Metal plating gets a sustainability makeover
Through innovations in plating production, customers reduce the use of hazardous
chemicals, waste and water, as well as increase their performance and profits.
As a 100-year-old plating division that Carlyle carved out of French oil and gas giant Total in 2017, Atotech
is hardly the stereotype of an environmental startup. However, it is precisely their deep plating expertise thatallows the Germany-based firm to innovate and develop sustainable plating processes that keep it ahead ofits competition.
Atotech’s goal is to become the leading supplier of sustainable plating systems. To that end, 38% of their
R&D investments are dedicated to achieving sustainability goals. These investments yielded breakthroughs forthe environment and cost savings: the first electroplating hard chrome process free of hexavalent chromium,a milestone for the entire industry; the Uniplate® system for printed circuit boards that enables customers
to consume 45% less water and 45% less chemical volume to plate their products than standard vertical

INDUSTRY Industrial
REGION

EuropeFUNDS

Carlyle Asia Partners IV
Carlyle Europe Partners IV
Carlyle Partners VI

plating lines; and Ecopact® CP, a direct metallization process free of cyanide and formaldehyde that reduces
customers’ use of water up to 28% and chemical volume up to 60%.
Martin Sumner, Carlyle Managing Director, says, “Atotech strongly believes in a more sustainable plating
industry. Their new product lines better respond to customer needs, use materials and energy more

INVESTED January 2017
STATUS

Current

efficiently and lower the company’s environmental impact—both in their own operations and those of
their customers.” The products serve Atotech’s ambition to remove from their processes all carcinogenic,
mutagenic and reproductive toxic substances; heavy metals; toxic substances such as cyanide, hexavalentchromium or nickel compounds; and allergenics.
Atotech is committed to the highest ESG standards. The company maintains ISO 14001 environmental
management certifications in its most important geographies, including China, Germany, the United
Kingdom and the United States. It maintains an excellent safety record of 1.31 incidents per 1 million

38%
29%

38% of R&D projects devoted tosustainable goals

29% reduction in primary energy
consumption across production
sites and major technology centersworking hours, well ahead of chemical industry averages. Atotech works to ensure no conflict minerals are
sourced in the making of their products. And the company designs its production equipment to reducewater, energy and materials use: primary energy consumption decreased 29% across production sites andmajor technology centers between 2016 and 2018.

2,100+

2,100+ registered active
patents, of which 1,700 are
for chemical processes and
400 are for equipment

19

CR E AT I N G VA LU E F O R I N V E S TO R S
VALUE DRIVERS

Essential chemistry for a sustainable future
Innovative specialty chemicals support customers’ desire for better performing solutions that
do not come at the environment’s expense.
With corporate roots dating back to the 1830s, Nouryon, carved out of AkzoNobel, ranks among Carlyle’s
oldest portfolio companies yet remains among our most productive innovators. As a specialty chemicals
manufacturer, Nouryon has both the technical expertise and business necessity to capitalize on customers’interest in more sustainable chemistry for their plating of everyday products.
Carlyle’s team spotted Nouryon’s pre-existing strength on ESG issues broadly and their R&D pipeline as
key assets in the business. In 2018, the year of our acquisition, Nouryon reduced its CO2 emissions by 3%,
sourced 47% of its energy usage from renewable sources and identified 20% of its revenue as linked totheir “eco-premium” category for products that offer a sustainability advantage to comparable solutions.

INDUSTRY Industrial

Nouryon routinely produced environmental innovations, including a joint venture with Evonik to reduce the

REGION

EuropeFUNDS

Carlyle Europe Partners IV
Carlyle International Energy Partners
Carlyle Partners VII

In 2017, the U.S. Environmental Protection Agency named Nouryon’s surface chemistry business “Safer
Choice Partner of the Year.”Upon investment, Carlyle appointed Charlie Shaver as CEO. He previously served as CEO of our portfolio

INVESTED October 2018
STATUS

ecological footprint of chlorine production at the company’s Ibbenbüren facility in Germany by up to 30%.

company Axalta, which has been featured in several of our annual citizenship reports. Axalta found successCurrent

in developing more sustainable paints and coatings that address customers’ environmental concerns. “WhenI came to Nouryon, I was excited to see a rich and diverse set of innovations, many linked to more sustainable

20%
>45%
–3%
50%
20

20% revenue from eco-premium
products with customer benefits

chemistry,” Charlie says. “Our challenge in this investment environment is to find the match between the rightinnovative R&D program and the best market opportunity.”
Building R&D at Nouryon continues to be a priority. In our short period of ownership, Nouryon has already>45% of all products havesustainability benefits
CO2 emissions in own operations
is down by 100,000 tons, whichequals a reduction of 3%
Almost 50% renewableenergy usage

announced a series of innovations with the potential to solve sustainability challenges for its customers,
including: a line of bio-based polymers for detergents and personal care, developed in partnership with
Itaconix; a proposal to build a waste-to-chemicals facility in Rotterdam, the Netherlands, in conjunction with
Shell; a more sustainable, water-miscible defoamer created for use in household and industrial cleaners;
and a more sustainable adhesion promoter, derived from renewable resources, for use in asphalt mixes.
And Nouryon continues to invest in operational efficiency, for example by increasing the use of bio-steam
at its operations in Hengelo and Delfzijl, the Netherlands, that reduces up to 150,000 metric tons of CO2
equivalent per year. As particular innovations come to market, the “eco-premium” line is expected to grow its
contribution to revenues and the bottom line.

CS: Jeanologica
VALUE DRIVERS

Eco-efficient technologies reshape the denim industry
Innovations in textile finishing improve the denim manufacturing process by reducing
water consumption and environmental impact.
“A particular strength of Carlyle’s team is spotting investments where consumer sustainability concerns
and innovative technologies come together to produce incredible products,” says Gregor P. Boehm,
Carlyle Managing Director and Co-head of Europe Buyout. “Jeanologia’s efficient and sustainableproduction technologies for the denim industry perfectly fits this bill, and Carlyle is uniquely positioned
to be their partner of choice.”
Established in 1994 and headquartered in Valencia, Spain, Jeanologia pushes for an ideally sustainable
and eco-efficient denim industry. Their laser, G2 ozone and e-flow system offer design possibilities andgarment finishes, while saving water, energy and chemicals, and eliminating waste and toxic emissions.
With clients in 61 countries, the biggest global market brands use the company’s disruptive technology tomeet their sustainability goals.

INDUSTRY Manufacturing

Carme Santacruz, Creative Designer at Jeanologia, says, “It is a challenge to work from an environmental

REGION

Europeperspective, but it is one that does not put constraints on creativity. Rather, it opens our minds to new,

FUND

Carlyle Europe Partners V

better ways of doing things.”
One example is Jeanologia’s 5.Zero, the world’s first laundry plant that promises zero waste and

INVESTED December 2018
STATUS

Current

pollution. The plant saves up to 85% on water and chemical usage in the textile industry and eliminatesharmful and labor-intensive garment finishing processes. Another innovation is the new e-Mark 5 laser
design software, which designers can use to digitize the garment finishing process and measure theenvironmental impact of finishes before a single stitch is made.
“We saw an opportunity to continue to transform the industry with Jeanologia and worked hard tobuild a strong relationship with its founder,” says Alex Wagenberg, Carlyle Managing Director. “Ourinvestment will support the company’s growth internationally, their continued R&D of technologicalsolutions and quickly moving these solutions into the market. We believe backing Jeanologia with
Carlyle’s strong brand will help accelerate adoption of this technology across all players in the industry.”

~15%
85%

~15% of the six billion jeans
produced annually are madewith Jeanologia’s technology

85% saved on water andchemical usage in the textile
industry from pioneering 5.Zerolaundry plant

21

CR E AT I N G VA LU E F O R I N V E S TO R S
VALUE DRIVER

Transforming packaging to meet sustainability concerns
Tube feed packaging and a non-hydrocarbon aerosol spray showcase packaging
innovations that lead to better usability and less waste and pollution.
When Carlyle Europe Partners IV invested in Portuguese plastics packaging firm Logoplaste in 2016, they saw
an opportunity to support the company’s creative solutions for improving the usability and environmental
profiles of packaging.
Nutricia’s OpTri bottle is one such innovation, designed to make nutraceutical feeding easier for patients,
caregivers and health care providers. OpTri offers new features in the tube nutrition market: fully collapsible,
easier grip, bigger eye for the hanging hook and a more hygienic safety cap. The bottle contains six layersof high-density polyethylene (HDPE) plastic to protect the product from oxygen. Most importantly, with thisINDUSTRY Industrial

all-in-one bottle, patients no longer need to transfer their liquid nutrition from cartons to a separate pouch

REGION

Europedelivery system, entirely eliminating “double packaging” and difficult-to-recycle cartons.

FUND

Carlyle Europe Partners IV

OpTri is recyclable and reclaimable, with waste plastic from the production process re-used and re-integrated

INVESTED October 2016
STATUS

into the manufacturing process. It produces 21% less CO2 emissions than the previous pouch.*

Current

Paulo Correia, Chief Technology Officer of Logoplaste, says, “We worked with Nutricia for four years to develop
the functionality of an all-in-one, ready-to-use bottle that is convenient to hold but collapsible like a pouch.

-85%

85% less water used during
nutraceutical feeding bottle’s
manufacturing process than theprevious pouch*

OpTri meets the needs of consumers and promotes sustainability at the same time. We launched the concept inFrance, Germany, The Netherlands and Belgium, and we’re excited that other European markets will follow.”
Another packaging innovation arose from Logoplaste’s partnership with Procter & Gamble and Dutch firm
AFA Dispensing: a propellant-free bottle with no need for pressurized gas, making it aerosol-free. Procter &Gamble wanted to integrate AFA’s spray in their portfolio, and Logoplaste developed the industrial platform

0

Zero non-recyclable multilayer
cartons in their liquid nutritiondelivery system

to produce the containers that did not exist at the time. The bottle has two layers: polyethylene terephthalate(PET) outside and HDPE inside to cover the product.
Carlos Robles, Carlyle Director, says, “If this unique non-aerosol spray packaging moves forward positively, we
could see other consumer-based products move to this technology within five years. Logoplaste’s Innovation
Lab continuously develops these types of user-friendly packaging solutions to help its clients meet theirsustainability goals.”

22*based on anticipated annual volumes, according to Nutricia

VALUE DRIVERS

A better way to reuse shipping boxes
Recycling corrugated boxes into raw material that is converted into paper bag products
satisfies sustainability needs and diverts tons of waste.
E-commerce has led to a rise in the need for corrugated cardboard shipping boxes while the production ofnewsprint is on the decline due to the prevalence of online news. This decline in newsprint has resulted inexcess capacity in paper mills and post-consumer cardboard waste that needs to be disposed of properly.
Novolex™, a leading manufacturer of paper and plastic packaging and products, has turned this market shift
into an opportunity by partnering with paper mills faced with a diminished printing and writing paper market.
Novolex created an innovative sustainability solution for its customers: recycle the cardboard shipping boxes
into brown Kraft paper for use in new foodservice and carryout bags sold under its Dubl Life® brand.

INDUSTRY Industrial

Kelly Wolfinbarger, Senior Director of Strategic Sourcing at Novolex, says, “Our technical experts worked withREGION

North America

paper mills to leverage their processes and develop the end-product specifications needed to recycle used

FUND

Carlyle Partners VI

corrugated containers. The process and products had to meet Novolex’s high standards for recycled fiber
content in the Kraft paper that we would use to make our Dubl Life products. In 2018, Novolex sold morethan 75,000 tons of Dubl Life products, serving thousands of retail, foodservice and grocery stores.”

INVESTED December 2016
STATUS

Current

Getting the recycled materials to meet Novolex specifications required collaboration between the company
and its suppliers. Suppliers of recycled paper materials were selected on the basis of their manufacturing
capabilities, capacity and the technology at their disposal. Location was also a factor—keeping suppliers
close to Dubl Life facilities would reduce transportation costs and emissions. In turn, suppliers welcomed theopportunity to work with Novolex since their mills producing newsprint paper were operating below capacity.

100%

The initiative enabled them to improve their return on invested capital and support jobs.
“Dubl Life is a great example of reduce, reuse and recycle,” says Phil Rozenski, Senior Director of Sustainability

100% recycled fiberin the Kraft paper
used for Dubl Life®
products, 60%of which is postconsumer corrugatedmaterial

at Novolex. “This process illustrates how materials can be recycled and be part of the circular economy, which isthe sustainability goal for our products. It’s not just about producing a quality bag. Dubl Life showcases how wecollaborate with suppliers, innovate, provide jobs and support local communities that want to reduce waste.”
Looking ahead, with the investment provided by Carlyle, Novolex is examining opportunities to expand its
production of recycled material to make Kraft paper at additional supplier mills and continually searching for123+

123+ tons per dayof old corrugatedcardboard used anddiverted from landfills

additional ways to reduce the environmental footprint of packaging.

23

CR E AT I N G VA LU E F O R I N V E S TO R S
VALUE DRIVERS

Recycling scrap tires proves its value
A new evaluation model uncovers how much the environment can benefit from recycling
and reusing end-of-life tires as the base of smart, sustainable products.
The United States generates nearly 300 million scrap tires every year, which presents an enormous challenge
for the waste management ecosystem. Historically, most of these tires would end up in a landfill, or worse, in
INDUSTRY Industrial
REGION

North America

FUND

Carlyle Strategic Partners IV

INVESTED August 2016
STATUS

Currenta dangerous tire pile. Liberty Tire Recycling, the premier provider of tire recycling services in the United States
and Canada, works to divert these scrap tires from the waste stream. The company transforms tires into raw
materials for productive secondary uses, such as molded rubber goods, rubberized asphalt, landscape mulch
and tire-derived fuel.
Seeing the potential value in such a solution, Carlyle initially invested in the company in August 2016 andultimately acquired a majority equity stake in December 2017. While Carlyle knew that recycling tires frees
up space in landfills, reduces environmental risks and produces sustainable alternatives, it had not quantified
these benefits. Carlyle felt a precise model for measuring this impact could add value to Liberty Tire’s businessby helping to guide its strategic decision-making, provide a selling point to customers and create an attractive

150 million

150 million scrap tires diverted fromthe waste stream each year

profile for investors.
As a result, Liberty Tire engaged Bridge House Advisors, an environmental services firm, to create an impact
model based on data from Liberty Tire and the industry. The types and magnitudes of the impacts that wereidentified and calculated were substantial. For example, rubberized asphalt saved 249 tons of CO2 per lane mile
paved compared to traditional asphalt, and even prevented 1 death and 161 injuries every year per 3,220 paved
lane miles of road due to improved safety performance, particularly in wet conditions. The value of diverting

249 tons

249 tons of CO2 saved by using
rubberized asphalt per lane mile
paved compared to traditional
asphalt

24

volumes of tires from landfills varied by state based on capacity, indicating where Liberty Tire’s services weremost valuable.
Thomas Womble, CEO of Liberty Tire, says, “We are constantly developing and testing new technologies to reusetire material and conserve natural resources. The analysis of Liberty Tire’s positive impact on the environment andpublic safety underscores the value of our tire recycling services to our customers and communities.”

VALUE DRIVERS

Changing consumer behavior one phase at a time
An innovative marketing approach to reduce the use of plastic straws in fast food dining
created a win-win for the company, customers and the environment.
McDonald’s Hong Kong works to continuously improve its environmental footprint and customer service. One
year after Carlyle’s investment in Grand Foods Holdings Limited, a quick service restaurant chain operator thatmanages McDonald’s restaurants in China and Hong Kong, McDonald’s Hong Kong collaborated with Ocean
Park Conservation Foundation Hong Kong (OPCFHK) to become a “No Straw Partner” and eliminate plastic.
Plastic straws are generally not compatible with recycling or composting programs. With more than 240

McDonald’s Hong Kong

restaurants throughout the territory, McDonald’s Hong Kong serves around one million customers per day andbecame one of the largest food chain companies participating in the campaign and a major contributor to theoverall reductions targeted.

INDUSTRY Consumer & Retail
REGION

East Asia & Pacificmarketing approach to bring customers into the challenge. Leading up to the campaign, they rolled out “No

FUNDCarlyle Asia Partners IV

Straw Monday” via press releases, an updated sustainability report, in-store communications and digital and

INVESTED July 2017social media messaging. They kept the restaurants’ straw dispensers empty, and staff did not offer straws

STATUS

Given customers’ long tradition of using straws, McDonald’s Hong Kong developed an innovative, phased

unless customers asked for them. Feedback showed that customers accepted the change as environmentally

Current

positive and one that did not alter their meal experience. Due to the success of the campaign, “No Straw
Monday” expanded to “No Straw Every Day” in December 2018.
By implementing several environmental initiatives, including phasing out foam packaging, reducing the use ofplastic straws and introducing wooden stirrers, McDonald’s Hong Kong expects to reduce its single-use plastic
usage by 30% every year. OPCFHK estimates the annual consumption of plastic straws in Hong Kong was
reduced by more than 260 million in 2018.
Randy Lai, CEO at McDonald’s Hong Kong, says, “It was gratifying to see our marketing put to good effect, withcustomers changing an entrenched behavior pretty quickly. The two-step introduction was an effective approach
to change behavior and a great model for the future. Today, requests for straws are few and far between.”25

CR E AT I N G VA LU E F O R I N V E S TO R S

Getting the most value by finding
the best partners

Seeding partnerships for infrastructure

Often the best way to grow and thrive is to leverage the

Our commitment to diversity and inclusion extends beyond our own operations and right down to theunique experiences, capabilities and perspectives of othergrassroots of the investments we make. In October 2018, the Port Authority of New York & New Jersey

organizations. At Carlyle, we believe our investment process

selected the Terminal One Team, of which The Carlyle Group is the lead financing sponsor, to lead thebenefits from our ability to search out and align with

$7 billion overhaul of Terminal One at New York’s JFK International Airport. Throughout the project tolike-minded companies who value sustainability-driven

date, Carlyle has placed an unprecedented focus on minority- and women-owned business opportunities,

innovation.

and it is quickly becoming a reference point for diversity in major infrastructure projects nationally while

These partners range from all sizes and sectors: McKissack,the nation’s oldest woman- and minority-owned

From day one of the project, Carlyle committed to prioritizing Minority- and Women-owned Businessconstruction management company, to overhaul JFKEnterprises (MWBE) participation beyond the Port Authority’s already historic 30% commitment. Peter

Airport; the IFC to develop green warehouses in China

Taylor, Co-head of Carlyle Global Infrastructure Opportunity Fund, says, “At Carlyle, we operate under(page 28); Ocean Park Conservation Foundation Hong Konga social license in infrastructure. You cannot take for granted the diverse community you work in. Our

to eliminate the use of straws in fast food service (page 25);

commitment to inclusion from the onset of the project was a key reason why we believe our team wasand technology and medical collaborators to develop fully

designated for the redevelopment of Terminal One. We have been credited with an innovative approach,customizable clinical trials (page 29).

but to me this is how all best-in-class infrastructure projects should be developed and operated.”

We have focused on proactive outreach in the communities
in which we operate to increase awareness and respond to
local concerns. We met with local owners of wind turbine
farms in New York State to ensure a smooth ownershiptransition (page 15) and forged invaluable relationships
with local professional services firms for the JFK Airport
redevelopment project.
Our partnerships and community outreach have helped
Carlyle and our portfolio companies to identify and reducerisks, innovate product lines and promote diversity andinclusion. We will continue to seek out partners, andencourage our portfolio companies to do so as well, as a
primary means to address evolving sustainability challenges.

26

securing a competitive advantage locally.

“We have been credited withan innovative approach, but tome this is how all best-in-classinfrastructure projects should
be developed and operated.”
PETER TAYLOR
CO-HEAD OF CARLYLEGLOBAL INFRASTRUCTURE
OPPORTUNITY FUND

Early on, Carlyle sought as team partners JLC Infrastructure, a minority-owned investment firm whose
sponsors are Loop Capital and Magic Johnson Enterprises, and McKissack, the nation’s oldest woman- andminority- owned construction management company with a strong community presence in New York.
Typically, MWBE participation stops at equity and construction. Carlyle is driving inclusion across the project,
at every phase and across all disciplines.
Carlyle is also very focused on community outreach and long-term job creation. Local MWBE professional
services firms serve as partners and advisors. The project team is participating in regular Port Authorityled meetings and job fairs, growing a database of MWBE firms, involving MWBE firms in mentorship andtraining, and planning an academy to train local residents in airport operations and management. In March
2019, the Port Authority opened a local JFK Redevelopment Community Information Center in Jamaica,
Queens to provide training, match local residents and firms with redevelopment opportunities and provide
a one-stop post for any community concerns. Nine MWBE firms were involved in the development of theCommunity Information Center, with more than 80% of the total cost subcontracted out to these firms.
“We deliberately sought MWBE expertise locally,” says Peter. “These firms bring incredible breadth andlocal knowledge that are advantageous to project delivery and operating costs. The resulting groundswellof community support, including from the JFK Redevelopment Community Advisory Council, separated ourteam from alternative proposals and allowed us to play offense instead of defense with local elected officials,

Throughout the Terminal One redevelopment
project to date, Carlyle has placed a particularfocus on minority- and women-owned business
opportunities, and it is quickly becoming areference point for diversity in major infrastructure
projects nationally while securing a competitive
advantage locally.

businesses and community leaders.”

27

CR E AT I N G VA LU E F O R I N V E S TO R S

CSP: RomeVALUE DRIVERS

Partnering with IFC to advance sustainable building design
In combination with the International Finance Corporation (IFC), Carlyle invests inwarehouses in China that are designed with sustainability in mind from the start.
In 2018, Carlyle invited IFC, the private investment arm of the World Bank Group, to participate in a
dedicated co-investment to develop green and sustainable warehouse buildings with a modern logistics

PROJECT ROME

platform in China, known as Project Rome..
The warehouses are being designed and built using EDGE, a tool developed by IFC that enables
development partners to identify potential green elements in their building designs quickly and early in theprocess. IFC’s range of EDGE solutions helps companies model how construction factors such as building
orientation, materials and energy-efficient lighting can help reduce costs and climate change impact. EDGE

INDUSTRY Real Estatefactors in local market conditions to provide cost-benefit data on specific green building features.

REGION

Asia Pacific

FUND

Carlyle Asia Real Estate Partners

Available for free online, the EDGE tool allows developers to design their projects to minimize water,compared to the baseline structure in all three categories in a given geography. IFC provides ongoing

INVESTED February 2017
STATUS

material and energy use. To become EDGE-certified, developers must achieve at least a 20% improvement
training to partner developers on how to use the EDGE tool and acquire EDGE certification, making it

Current

both cheaper and easier to use than more cumbersome alternatives. Project Rome’s commitment to EDGE
certification prompted IFC to double its investment.
Carlyle and IFC are developing, building and operating nine warehouses in various cities across China.

9Nine warehouses in China
totaling 10 million square
feet comprise Carlyle’s
China Logistics Platform

All of the warehouses are located in large population centers with easy access to major transportation
networks and in industrial parks with no large residential communities nearby. This project represents thefirst time EDGE has been applied to warehouses in China. When complete, the warehouses will total 10
million square feet.
The properties’ high environmental standards are expected to make them attractive to world-classtenants, an appeal that can enhance the investments’ performance. Targeted tenants include third-party

The project’s commitment
to EDGE certification
prompted IFC to double
its investment

28

logistics providers, e-commerce companies, retailers or manufacturers with light assembly activities onsite.
One of the project’s first tenants is Carrefour SA, a multinational retailer based in France.

VALUE DRIVERS

Making clinical trials easier and faster
Accelerated enrollment and virtual trials can increase patient access, retention andengagement in medical research that could benefit all.
One of the most stubborn challenges in drug development is enrolling patients in clinical trials for new
medical therapies. Many potential participants do not know about these trials, do not live near the researchsites or find that joining is too demanding for their busy lives.
Building on its more than 30-year history of quality execution and on-time delivery for biopharmaceuticalclients, Pharmaceutical Product Development, LLC (PPD) is tackling these challenges with innovative patientcentric strategies for trial enrollment. PPD aims to provide patients with quicker access to treatment theyINDUSTRY Healthcare

might not otherwise receive and enhance their clinical trial experience as well. If new treatments can be tested

REGION

North America

FUND

Carlyle Partners VI

quicker, then these drugs’ availability will increase for the broader population who suffer from pain or disease.
PPD business unit Accelerated Enrollment Solutions (AES) is the largest global patient access and clinical site
conduct business, spanning 150 locations in 20 countries. AES enrolls all of the patients in a clinical trial inas quickly as half the time compared to historic norms. David Simmons, Chairman and CEO of PPD, says,

INVESTED May 2017
STATUS

Current“Only 5% of eligible trial participants are patients of the researcher’s medical practice or in the researcher’s
database. To reach the remaining 95%, AES’ proprietary methodology quickly and predictably recruits andenrolls patients who previously were difficult to identify.”
Also, to help address the geographic barriers and time constraints associated with traditional clinical trials
that can discourage many eligible patients from participating, PPD is developing fully customizable virtual
trials organically and through collaborations and partnerships. These include digitally enabled, hybrid-parallel-50%

Up to 50% reduction in time
it takes for all patients tobe enrolled in a clinical trial,
compared to historic norms

and fully virtual studies, all of which leverage technology and data to drive efficiencies while lowering theparticipation burden. By creating a more convenient trial experience, PPD can help customers reach, recruitand retain more patients.
Carlyle believed in PPD’s progressive approach when they invested in the company in 2017 to drive continued
growth. Steve Wise, Carlyle Managing Director, says, “By leveraging patient-centric services, along withwearables and other remote technologies to make the trial experience easier for patients, PPD is innovating

Removing geographic barriers
to enable more patients toparticipate in clinical trials ofpromising medical therapies

to enable faster and more productive clinical trials—ultimately improving health by helping their customers
deliver life-changing drug therapies.”29

3

LEAD BY EXAMPLE AMONG PRIVATE INVESTMENT FIRMS

Our ESG strategy includes seeking ways to innovate within
our own firm by advancing ESG issues. We work to cultivate
an environment rich in different backgrounds, perspectives
and experiences. We participate in ESG events andorganizations, aiming to stay at the forefront of emerging
issues such as climate risk. We encourage our employees to
get involved where they live, work and invest through ourvolunteer and wealth sharing programs. And we work tocontinually improve environmental stewardship within ourfirm, particularly in the areas of energy and materials use.

30

LE ADING BY E X AMPLE IN ESG PR ACTICES

1001 Pennsylvania Avenue renovations
In 2019, our Washington, DC offices added additional floors within its 1001 Pennsylvania Avenue
headquarters, with the renovated space offering several environmental advantages. The lighting power
density has been reduced significantly compared to the old space, and is now 44–49% better than thealready stringent DC Green Construction Code. One hundred percent of lighting in the new space isefficient light-emitting diode (LED), and the lighting is attenuated by occupancy sensors and daylightharvesting photo sensors. The air volume system now uses variable frequency drives and will undergo
commissioning to ensure it functions as designed throughout the seasons.

Carbon neutrality
In last year’s report, we announced that Carlyle had become the first major private equity firm tooperate on a carbon-neutral basis, and over the last year we continued with that commitment. Our

CATEGORY		EMISSIONS(MT CO2E)

approach to carbon is to measure, reduce and offset our emissions. In line with our commitment to

Office Utilities (Scope 2)		5,117

leadership in this field, we shared our methodology with other private equity firms who embarked on

Data Centers (Scope 2)		403

their own footprinting efforts.

Air Travel (Scope 3)		9,655

Measure In line with the World Resources Institute’s Greenhouse Gas Protocol, we measured eachCommuting (Scope 3)		1,301

scope (1, 2 and 3) of our emissions. Our 2018 footprint was more than 6% smaller than our 2017

TOTAL				16,476

footprint on a per-capita basis, mostly due to a reduction in air travel.
Reduce Every year our Global Technology Solutions team looks for means to reduce our footprint.
In 2018, they continued our aggressive shift toward the cloud, decommissioning more than adozen servers and reducing energy use at our data centers. Further, a new virtual desktop solution
eliminated the need to provide hundreds of laptops for consultants, resulting in significant material(and therefore carbon) savings.
Offset As we did last year, we purchased offset credits from Carbonfund.org that support theelectrification of truck rest stops. This project provides electrical and heat hookups that allow
those functions to come directly from the grid rather than relying on a diesel engine, saving carbon
and other emissions. The technology is not yet commercially viable, which is what gives Carlyle’s
funding the “additionality” in averting carbon emissions.
31LE ADING BY E X AMPLE IN ESG PR ACTICESCreating greater employee engagement and value for our investors
A diverse and inclusive culture is a competitive edge that enables us to make the best decisions
and attract the best talent across geographies, strategies and functions. Helping to hone that edge
is our Chief Inclusion and Diversity Officer, Kara Helander.
Prior to joining Carlyle, Kara co-founded the Science of Diversity and Inclusion Initiative and spent“Given Carlyle’s reach, thispresents an extraordinary
opportunity to impact
business and our broader
society.”
KARA HELANDER
CHIEF INCLUSION AND DIVERSITY OFFICER

60%

of promotions
to partner in 2018
were women32

10 years as managing director and global head of diversity and inclusion at BlackRock. In addition
to leading Carlyle’s in-house inclusion efforts, Kara works to diversify the boards of our portfolio
companies. “Given Carlyle’s reach, this presents an extraordinary opportunity to impact businessand our broader society.”
Carlyle women senior leaders (Managing Directors and Partners)

IAN FUJIYAMACURT BUSER

Carlyle’s Diversity & Inclusion Council goes global
Since our last report, we made key changes to our Diversity & Inclusion Council that guides
the firm’s overall diversity and inclusion efforts. To better reflect the scope and importanceof our diversity and inclusion work, the council is global and now comprises our mostsenior leaders.

BROOKE COBURNXD YANGGREGOR BOEHM

CHRIS FINN
KARA HELANDERRUULKE BAGIJNROB STUCKEY

GLENN YOUNGKINKEWSONG LEE

D&I COUNCIL CO-CHAIRSSANDRA HORBACH

MIKE ARPEY

HEATHER MITCHELLPETE CLARE

MARCEL VAN POECKE“Diversity is not a corporate function—it isa mindset, something Carlyle needs to liveout every day. It takes focused strategies
and leadership from the top but real
success happens when it is a cultural norm
for the entire organization.”
GLENN YOUNGKIN, CO-CHIEF EXECUTIVE OFFICERMARK JENKINS

33

LE ADING BY E X AMPLE IN ESG PR ACTICES

Recognition for Carlyle leaders

Our Year Up partnership

We are proud of the recognition that Carlyle

Since 2007, Carlyle has partnered with Year Up in the staffing of internships and contract roles. Year Up

leaders received for being role models andprovides urban young adults with the skills, experience and support that will empower them to reach theirleading change in the industry, including:potential through professional careers and higher education.
The organization offers intensive training programs that provide opportunities for young adults ages 18–24

TANAKA MASWOSWE,
named one of Business
Insider’s Rising Stars of WallStreet in November 2018.
RUULKE BAGIJN chairs theLevel 20 Dutch Committee in
Amsterdam, a non-profit thatinspires women to join andto gain hands-on skills development, coursework eligible for college credits, corporate internships andwraparound support that helps them to better secure employment.
Our Global Technology and Solutions (GTS) organization provided internships for 78 women and men fromvarious ethnic backgrounds via Year Up, a six-month internship offering hands-on technology experience andopportunities to work directly with Carlyle’s diverse internal employee base. To date, Carlyle has hired fourinterns for full-time positions and extended employment for more than 21 via contract roles.
GTS also partners with McKinley Technology School, a premier STEM (Science, Technology, Engineering and Math)high school in Washington, DC. To date, GTS has hosted two male and two female interns from McKinley.

succeed in the private equity

Employee Resource Groups

industry.

Our Employee Resource Groups (ERGs) provide the opportunity for employees across the firm to connect,develop professionally and help shape our culture. ERGs create meaningful opportunities for members to

LUBNA QUNASH, named one

advance their careers, share experiences and enhance their impact and engagement. Carlyle ERGs include:of Financial News’ 25 up-and-• DC/Rosslyn Women• Young Professionals

coming young stars in private• NY Women• Working Parents

equity for 2018.

• Multicultural• Lesbian, Gay, Bisexual,• Veterans

HEATHER MITCHELL won the‘General Counsel of the Year’award from Legal Business.

34

Transgender and Queer (LGBTQ)Key Performance Indicators (KPIs)
ALL U.S. EMPLOYEES

49%

60%

18%

Of investment professionals hiredin the U.S. in 2018 were diverse*

Female in the 2019 U.S. CPE
incoming post-MBA class

Female Managing Directors
and Partners

48%

42%

23%

Overall hiring diversity (by genderand race) in Analyst-Partner levels*

Overall population diversity (bygender and race) in AnalystPartner levels*

Women in senior positions(Principal-Partner levels)$110 B
Assets Under Management (AUM)
managed by women senior leaders(out of a total $222B Carlyle AUM)SANDRA HORBACH—US BUYOUT$39.0 BILLION67%
CPE 2-Year Associate class has
been more than 50% diverse overthe last five years, with the 2020
class at 67%*

U.S. CPE 2-Year Associate Class
Diversity by Race/Gender

LINDA PACE

(percent)—LOANS &70

STRUCTURED CREDIT

60$25.6 BILLION

50
40
30
20

RUULKE BAGIJN10—INVESTMENT

0
2016

2017

2018

2019

2020

ALL GLOBAL EMPLOYEES$45.4 BILLION

23%

20%

17%

Female promotions for
Principal through Partner

Women in senior positions(Principal-Partner levels)

Female Managing Directors
and Partners*Diversity by Gender and Race includes Females, American Indian/Alaskan Native, Blacks, Hispanics, Native Hawaiian, Other and Two
or more Races
Data as of December 31, 2018

SOLUTIONS

Data as of March 31, 201935

LE ADING BY E X AMPLE IN ESG PR ACTICES

600+

Mentoring: Building an inclusive culture and boosting careers
Mentorship is powerful. It turbo charges careers and expands opportunities. At Carlyle, we do not leave it tochance. The Diversity & Incusion Council created our global mentoring program in 2014, and since then morethan 600 employees have participated from every corner of the firm.

participants in Carlyle
mentorship program

Vice president to partner in five years
Sarah Schwarzschild had lunch with Ed Mathias, a Senior Advisor, right after he waspaired with her as her mentor. “Based on that lunch he concluded that leveraging myteam was going to be key to my success,” she remembers. Ed’s observation appears tohave been prescient: since joining Carlyle five years ago, Sarah has been promoted threetimes and is now a partner.

Paving the way from New York to Amsterdam
Sarah pays it forward by being a mentor herself, for Samantha Meskin, an Associate
at AlpInvest Partners. Sam says, “The introductions Sarah made for me helped makea large firm feel much smaller and paved the way for me to move from New York to
Amsterdam with the firm.”

Sarah Schwarzschild and Ed Mathias

Carlyle’s culture in action
Recognizing how his own mentors contributed to his successful career
path, Curtis Johnson, a Managing Director on the Investor Relations
team, found much satisfaction mentoring Chirayu SJB Rana, an Associatewith Global Credit. Chirayu says Curtis helped him grow professionallyand personally. “It is refreshing to see how senior people are successful
in their own fields but also real human beings with interests outside ofwork,” Chirayu says. “The mentorship program at Carlyle is a perfect
example of Carlyle’s culture in action.”

36

Curtis Johnson and Chirayu SJB Rana

Philanthropy
Global Volunteer Month Employees from across the globe volunteered with several organizations
during Carlyle’s seventh annual Global Volunteer Month.

Washington, DC, and Rosslyn, Virginia, United States Employees volunteered with a rangeof organizations:• Served meals and cleaned facilities at So Others Might Eat, a local organization that cares for the homeless.
• Participated in hands-on urban farm work at DC Greens, a local organization working to advance foodjustice in the nation’s capital.
• Mulched trees and helped clean and beautify Rock Creek Park in Washington, DC.
• A ssisted with outdoor chores and landscaping at House with a Heart Pet Sanctuary, a local organizationthat houses and cares for elderly pets.
• Volunteered for a ninth consecutive year with Junior Achievement’s “JA in a Day” program to teachfinancial literacy to first- through fifth-grade classes in a Washington, DC elementary school.

New York Employees visited Randall’s Island Park to build raised beds, mulch and help with planting at
the urban farm.

London More than 20 employees ran in the JP Morgan Corporate Challenge benefiting Cancer Research
UK, an organization that funds scientists, doctors and nurses dedicated to cancer research. Employees alsocollected charitable donations at tube stations for Help for Heroes, providing assistance to service personnel,
veterans and their families.

Hong Kong Volunteers prepared meal boxes for Food Angel, a food rescue and assistance program thatprovides meals for underprivileged communities in Hong Kong.

Japan Volunteers provided administrative support at the Japan International Volunteer Center and helped
cleanup efforts at Komazawa Olympic Park, Mount Takao and Fukudenkai orphanage.

A Commitment to Sharing Wealth Our Wealth Sharing Program supports Carlyle employees intheir charitable giving by matching on a dollar-for-dollar basis any contributions made to educational andhumanitarian organizations. In the United States, Carlyle matches up to $2,000 per year per employee.
In 2017, Carlyle matched nearly $300,000 in employee contributions. A similar matching program in the
United Kingdom raised $38,000 in 2017. A total of more than $10,000 in charitable donations was matchedas part of our U.K. gift matching scheme in 2018.

One Community Volunteer Program
Carlyle’s One Community program encourages employees
to volunteer in their own local communities—as well as atorganizations across the country and around the world.
We had another great year whereby our employees shared
their time, talent and resources with a variety of charitableorganizations as they worked to improve the places where
they live and invest.

1001 Pennsylvania Avenue, NW
Washington, DC 20004-2505

www.carlyle.com

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