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Issue 10.12



07. Gassification | Time to Make Money from Landfills. 16. Finance | Mid Market Companies in the Catbird Seat. 28. Case Study | Cambell’s Soup: Portrait of a Successful Plan 38. Interview | Connecticut Parters with Private Capital to Meet Long Term Goals.

2 Deals traditionally done in banks are now being done in corporate boardrooms. Changes in financing, brought about by the demands of clean and bio-technologies, are now rippling through US industries. A great strength of capital markets is the ability to be flexible, finding new ways to change and evolve with new opportunities. In this issue we look at a variety of those changes: how private equity and corporations are funding new technologies and entrepreneurs, a public-private partnership in Connecticut, and how ESG — Environmental, Social and Governance — is providing metrics that bring transparency and manage risk. Once the domain of clean technology entrepreneurs, industries from manufacturers to hotels to technology — and more — are investing in operational savings, developing new products and growing corporate value.


We especially want to thank Dow Jones for two events which provided the back ground and sources for some of this issue. The first is The Annual Dow Jones Private Equity Analysts convention, and a webinar


ESG: Is Your Firm Prepared For LP Questions?

A Tana Kantor Publisher



Stay Connected Join the Conversation Each month THE GREEN ECONOMY posts questions to be included in the next issue of the eMagazine. Questions are posted on Facebook, our Linkedin group, and our monthly eNewsletter. You can respond by sending letters to editor@, or joining any of the social networks listed below. Some letters are edited for brevity. Readers must include name, title and affiliation.

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07. Gasification Time to Make Money from Landfills.

36. Waka-Waka A Powerful Solar Lamp with Plans to Light the World.

38. Patent-to-Profit Making the Leap from Idea to Commercialization.

42. Interview: David Goldberg Connecticut’s Director of Government and Legislative Affairs on Partnering with Private Industry.


MID MARKET CRUNCH 12. Cash is King Corporations and MidMarket Private Equity Fill the Gap for Corporate Expansion. But that means ‘New Rules’.

16. Funding New Initiatives Mid-Market Companies in the Catbird Seat.

21. What the Fortune 500 Know about ESG Environmental | Social | Governance: Moving Beyond Risk Management to Value Creation.

28. Case Study: Campbell’s Soup An Iconic brand with a nourishing plan for the long term.




Time to start making money from landfills. In 2010, over 50% of the waste went into landfills even though the waste stream contains high quality fuel resources that can be refined into clean burning fuels. Waste to energy (W2E) presents an opportunity to address two major environmental problems, the need for new energy resources and the abundant waste going into landfills. Modern waste gasification technologies provide the means to achieve zero waste by ensuring that all materials can be reused instead of wasted.


asification provides the capability to separate materials at a molecular level, sifting out contaminants and providing clean fuel outputs. Using any carbon-based material — biomass, coal or waste — gasification subjects materials to high temperatures inside of a sealed vessel with oxygen carefully controlled. The materials are

not allowed to combust into flame, but instead break down. The temperatures are extremely high, as much as 10,000 degrees Fahrenheit in some systems, causing molecular disassociation or the complete break down of molecular bonds. Elements either flow off the reactor as a gas or melt into magma where organic toxins are destroyed. Mineral elements — metals, stone, or glass — melt, flow and harden into slag, which looks like volcanic glass or obsidian. Slag can be used as a versatile construction material. The gas is cooled or scrubbed, which removes impurities such as nitrogen, sulfur, mercury and other heavy metals, leaving a synthetic gas or ‘syngas’. Syngas is a clean-burning gas similar to natural gas, but with lower BTU. Syngas is readily upgraded into a wide variety of commodity products such as clean liquid fuels, natural gas, plastics and chemicals. The impurities, now refined, can be sold as valuable commodities. The heat generated by the process is

captured in heat exchangers and cycled back into the process.


asification is poised to replace combustion in a wide swath of industrial processes because it cleans contaminants prior to combustion: it is much more efficient to scrub the fuel inputs rather than the exhaust. Another advantage of gasification is that materials that are commonly burned, creating pollution, can be cleaned to the level of natural gas, while the polluting elements are transformed from liabilities into assets. The combustion process itself is vastly improved, minimizing the formation of dioxins and furans which form during combustion.

As important, ‘low-grade’ fuel resources, such as municipal solid waste (MSW), high sulfur coal, and debris like telephone poles, railroad ties and tires, can be used in a gasification process. On the output side, syngas is a versatile, transportable and storable commodity that can be used to produce transportation fuels or electricity. Syngas can be made back into plastics and reused. Biomass, coal and waste can all be used together in a common system to produce commodities that can replace imported oil with proven technology available today. “Clean Coal,” widely touted by industry, is coal gasification. Because of the long history in

coal and biomass gasification, there are many different system designs. All systems share in common that high temperatures are applied inside a sealed vessel or reactor with controlled oxygen, air or water inputs. Steam may be used to enhance hydrogen content of the resulting gas, which improves fuel value.


istorically, the combination of landfills and incinerators are the most traditional means of getting rid of waste. While landfills have been around for a very long time, a survey in 2010 showed that 76% of communities did not want one in their neighborhood. That’s down from 87% in 2007, but not a resounding approval for the most



prevalent means of getting rid of trash.

as a natural gas, while increasing costs.

Modern landfills continue to be a basic means of reducing waste because they are cheap to op-

The second means of disposal has been incineration, but is out of favor in the United States.

regulations and NIMBY (Not In My Back Yard). Debate over W2E in New York is fever pitched, while New York City has some of the most difficult waste disposal issues in America. As a result,

Clockwise from left

ƒƒ ƒƒ ƒƒ ƒƒ erate. Using liners and covers, they can minimize seepage and odor, although still producing significant amounts of methane, a greenhouse gas twenty-one times more potent than CO2. Some of the methane from landfills is captured and used by utilities as a renewable fuel. However, the process is inefficient because the methane is contaminated with other gasses, which means it must be ‘scrubbed’. This process reduces its usefulness for utilities

Historically, crude incinerators burned unsorted waste, producing massive amounts of pollution. Most incinerators were phased out for environmental reasons. Those that remain received extensive upgrades to their exhaust stacks to reduce air pollution, making them more expensive. Although incineration as a means to produce energy is popular in Europe, it has failed to catch on in the US, possibly due to the poor performance of past incinerators, local environmental

Gasification Minerals from Slag Red Slag Glass for sale Purple slag vase

no new waste incinerators — or gasifiers — have been built in the U.S. in nearly 20 years.


educe, reuse and recycle — the 3Rs — is a more modern approach that has gained traction since the 1970s. Creating many new markets for recycled raw materials, such as aluminum, metals, glass, plastics, paper and compostable organics, is an important step in the right direction. The 3R’s: ƒƒ Reduce the amount of

consumption and minimize packaging. ƒƒ Reuse everything that can be reused without reprocessing. ƒƒ Recycle everything else. However, there are broad categories of waste with no efficient market or technology for their reuse or recycling. In addition, some waste is contaminated with other materials, making recycling inefficient. Waste gasification completes the circuit, avoiding landfills by reprocessing all those non-recyclable materials for use as W2E.


n a technical level, for waste gasification to be effective, the raw

materials need to be sorted and pre-processed. Glass and metals have no fuel value, so should be removed. The remaining percentages are then melted into slag. The challenge, both economically and technically, in converting waste to energy is the fact that garbage is by nature heterogeneous and difficult to work with physically. MSW (Municipal Solid Waste) may be contaminated with all sorts of chemicals. MSW also varies dramatically in content, as well as size and shape. The MSW must be shredded, sifted, sorted, dried and physically processed before it is in a form suitable to be efficiently gasified.

The pre-processing is expensive and requires heavy machinery that can require intensive maintenance. The technical processes are improving all the time and there continues to be innovation, but the physical processing is very complex.


solution is to encourage recycling, which is complementary. Recycling creates ‘cleaner’ waste stream, which means more value can be extracted at less expense. Countries in Europe with the most W2E also have the highest rates of recycling.

T h i n k O u t s i d e T h e B i n . c o m









ƒƒ Since 1960, America has tripled our waste ƒƒ About 1/10th of all solid garbage in the U.S. gets recycled. ƒƒ * EVERY DAY, the U.S. throws away enough trash to fill 63,000 garbage trucks. ƒƒ Almost 1/3rd of waste generated in the U.S. is unnecessary packaging. ƒƒ Each year, Americans toss out enough disposable utensils and cups to circle the equator 300 times. ƒƒ In the state of Ohio, the second highest point is Mount Rumpke, at over 1100 feet. But this “mountain” is not a mountain, but a mound of trash.



ƒƒ As of 1992, 14 billion pounds of trash were dumped into the ocean annually around the world. ƒƒ There is a plastic island twice the size of Texas in the Pacific ocean, created from waste. ƒƒ Enough hazardous waste is generated in 12 months to fill the New Orleans Superdome 1,500 times over



Sales: 609.520.0056 Media Kit on Request

Economically, glass, metals, highgrade plastics and papers — as well as clean organics — can be sold for much higher prices on recycling markets than as fuel or slag. Natural market forces ensure that all materials end up where they capture their greatest value. The trick is making sure that those markets physically exist. Where there are no facilities or transportation systems in place to deal with recyclables, there is no market. This means that the low grade, highly contaminated — but potentially valuable — wastes that are precisely the material best sent to the gasifier, are not likely to find a market. They simply go to a landfill, where they continue to cause air and water pollution.


or municipalities wrestling with waste disposal problems, landfills are not a sustainable solution. As communities continue to fight new facilities, while demanding the closure of existing ones, solutions seem hard to find. High costs, technical complexities, tight budgets and polarized politics make construction of an expensive new technology difficult. However, pressures caused by rising transportation costs, make shipping trash to a distant landfill more expensive, which is making municipalities search for newer

solutions. For such pressures, a nearby W2E facility would create clean hydrocarbon fuels for electricity and transportation, while developing markets for potentially dangerous materials.

transportation. Gasification and scrubbing are one of the key technologies needed to clean fuel supplies, achieve zero-waste and energy independence.

As cities embrace the challenges of climate change along with heightened concern about carbon pollution, resistance against any form of carbonbased fuels is rising. A renewable energy from the trash that is inevitable in crowded cities offers many benefits. Natural gas equivalents are an improvement over coal, gasoline and diesel, in terms of energy efficiency, carbon emissions and overall pollution. Landfills produce significant quantities of methane and some analysis argues that waste to energy reduces greenhouse gas emissions over landfilling. Clean natural gas equivalents are the most efficient and environmentally sensitive way to consume hydrocarbons. Society is not going to stop burning hydrocarbons anytime soon, because there is no viable replacement. It is critical to at least do it in the cleanest manner possible. It is equally critical to embrace domestic resources, lessening the need for conflicts abroad. America has ample resources that are literally going to waste and can be used today to provide heat, electricity and

Edward Dodge is an experienced technology professional with a background in renewable energy and information technology. He has an MBA and a BS from Cornell University..








$CASH$ Cash is king: making more, cutting costs, and managing the risks that reduce capital without producing benefits.

Manufacturing Survey: TGE Keyword: Survey

Business is worried about operational and logistics costs, and access to cash, not taxes and regulations. As banks retreat, private equity is finding new opportunities in midmarket companies — and vice versa. For CFOs and CEOs accustomed to a bank’s spread sheet approach to lending, new requirements focused on management practices, future growth potential and marketing, is both good news and a challenge.

















investing in a

smarter infrastructure:

Cleaner Cheap and Abundant More Reliable Safer





Being smarter about energy isn’t 14turning out lights and using less.

That’s what we do. We find new companies with low-cost, high-return technologies that make existing energy systems cleaner, cheap and abundant, more reliable and safer. Given the scale of existing infrastructure, these technologies offer massive “bang for the buck.” Many are hidden in plain sight, and just need the right injection of capital or entrepreneurial leadership to unleash their potential. Join us as we survey the exciting opportunities in the emerging world of digital energy.

We make energy better. Investor Relations Learn More

The “buzz” at a recent Dow Jones Equity Analyst convention was all about the mid-market: mid-market funds and midmarket companies. While there are many reasons for this, one is the ‘trickle down’ from large and mega-firms .

Please use the navigation in the margins to check out our stories.


In this special section, we take a look at who is investing and why, the new metrics for value creation that are driving investors, and some tools and resources for evaluating new strategies.


In short, opportunity moves from the ‘early adopters’ to the mid market, as new strategies are created, tested and applied. As the larger firms see the benefits of ideas that save money, spur innovation and manage risk, they begin to require those practices througout their supply chain. One need only look at computers to see how soon corporate buyers wanted computerized data.


The ‘trickle down’ starts as corporations bring new ideas and approaches in-house, moving away from the consultancies that helped them through complex transitions. Meanwhile, the consultancies start to package their best-of-class ideas into training, frameworks and processes that are accessible to the mid-market, and eventually to small busiensses.


As in any technology shift, the ‘early adopters’ are large corporations that have the resources to try out new things by hiring consultants or taking on new staff. For companies with fewer resources — but whose business will be impacted by technological and economic shifts — adopting ideas proven by market leaders is just smart business.


in the Catbird* Seat.







The ‘clean tech’ sector — even for traditional business — is driving innovation and growth. Looking to reduce costs through energy efficiency and the built environment, water and nano technologies, clean manufacturing and bio-based chemicals, companies turn to new funding partners that have both technical and operational expertise.

“If the rate of change on the outside exceeds the rate of change on the inside, then the end is near.”

Large companies looking for new markets and products face the ‘Build or Buy’ question. Buying brings new cultures, ideas and Jack Welch processes that can pose integration problems, while building in- Former CEO, GE house can lead to expensive development processes that may result in minimal — or non-existent — returns. Companies looking to expand and finding banks’ doors closed, are learning how to quantify value beyond the bottom line, to show their plans for future success and longevity.

Emerging technologies

For those who are looking to buy, Lux Research has made a business of helping companies find the right mix of partners and technology. Lux Research’s Michael Holman has seen how Venture Capital — with its need for fast turn around and aggressive income — is broken for companies outside of IT. As he said,

“For small tech developers and large corporations, working together effectively is the key to success at going from innovation to adoption.”

New rules for start-ups to connect with unlikely corporate backers.

“With the IPO window essentially closed, a sale to a corporation is the primary means for private equity

That was the introduction to a panel of corporations looking for strategic investments. The reasons that corporations are buying is varied, but what they seek is underlying value, and that value can be found in patents, consistent life cycle of revenue, great management, and new processes that manage commodity and other types of risk. The goal is a partnership that is synergistic with existing corporate products or their missions.


Mid-Market Corporate Investors

and venture capital to exit portfolio companies.�


As strategic partners, experienced firms bring value to entrepreneurs because they can identify uses for products and new technologies, while evaluating the potential for various approaches among existing customers, reducing costly mistakes.


David Barr, Managing Director at Warburg Pincus said that they were looking for growth

New Funding Paradigm for Clean & Bio-Technology


Invention/ Prototype

What are the end market needs?

Product Development

Likely Government Venture Capital Funder Funding/Grants (Angels, SBIRs) Organization


Start-ups By-pass

* Based on matrix developed by Michael Holman, PhD, Lux Research.

What markets and business models?

Product Introduction

Product Scale


What research is commercially viable?

Corporate R&D Budgets

Purchasing Departments


Large Corporations

End Users





18 in emerging markets. However, an important first step is to verify that existing in-country partners are legitimate and can produce the results — and also have the needed connections — that they claim to have. Mark Gottlieb, VP Treasury and Business Development at Endo Health Solutions, added that regulatory uncertainty — a concern in the health care industry — tended to encourage buying rather than building. For example, they look for companies developing generics in advance of products coming off-patent. Building on existing Clean tech is intellectual property means not an industry, they are likely to have a handle on the regulatory process and it is the future other potential pitfalls. He said that Endo Health Solutions way of doing had done 7 deals in the last 5 business. years, motivated by ‘speed to market’. He added that they often need to do ‘remedial Dr. van lierop work’ to push organizational development, but that the payoff was worth the effort. Jeff Brennan, Director of Corporate Transactions at Pitney Bowles, said they were now leaning toward build rather than buy, currently ‘digesting’ existing acquisitions. This is a departure from ten years ago, when they were buying rather than building. He added that now is very different from the ‘go-go 90’s’, which has lead to a less formal process, presumably because the

companies they are interested in are fewer and have been pre-vetted. Rich Lawson, Co-founder and Managing Partner of Huntsman Gay Global Capital, summed up by saying that the current environment was more cautious, with larger teams taking part in the due diligence. Strategics — companies looking for strategic purchases — are taking more time to architect a vision for where a new company fits into organizational goals. He credited Scott Humphrey, Managing Director and Head of US Mergers & Acquisitions at BMO Capital Markets, for a recent exit for one of their companies, acknowledging that Huntsman Gay entered alone but exited with partners. For mid-market companies, such partnerships provide needed access to larger markets, along with expertise and the capital to take a company to the next level. Focusing on all factors that increase value is an important step in that process.

Mid-Market Private Equity Investors Mid-market investors are finding themselves in an enviable position, finding good companies with solid fundamentals that want to expand. By providing not only financing but expertise in larger markets, mid-market investors are bringing more than cash. Talking about their success and concerns, a panel of

As for exiting, Mr. Falk expects that a third of their companies will be bought by strategic corporate partners, with the remaining going to mega firms. For Mr Thoma, the figure is more a 50/50 split.

“We plan for the worst and pray for the best.” Mr. Roth, whose firm invests in retail, watches same store sales each day, but does so to observe strategy and organizational development. He does not want to see reactive leaders, but wants to be sure that they are well informed. Mr. Thoma, however, looks at cash flow and margins: what are the strategies for growth and does the organization

Understanding long term technology risk, Chrysalix is a venture capital firm that invests in new and emerging What is middle market? We asked technologies and compa- three Private Equity firms that nies, but looks invested in the middle market. exclusively to c o r p o r a t i o n s Their response: as Limited “Market Capitalization of $100Partners. Founded by Dr. 200 million, a basic infrastructure Wal van Lierop, in place, but small enough so Chrysalix is fillthat the company can implement ing a void left by corporations changes.” that would like “Sometimes we look for lower to know about — and poten- capitalization.” tially invest in “Definitely lower capitalization, — new technologies, but because we look for fewer layers of do not have management.” the capacity


Mr. Falk acknowledged that their firm has become more cautious on valuations, and therefore looks for more — and broader — analysis then before.

A New VC Model: Corporations as LPs


Of the risks, Carl D. Thoma, Managing Partner, Thoma Bravo put uninformed investors — with $5-6 million but an unrealistic view of the market and new technologies — as a major concern. John Roth, General Partner and President at Freeman Spogli & Co., was more concerned with the future shape of tax equity, health care policy and who else is ‘grazing’ in their space. He added that ‘post downturn’, he now looked for a stable management team that can demonstrate resiliency. Michael Falk, Managing Partner, the ComVest Group, concurred, having had negative experiences with young management. He tends to want to see a team that has ‘been through some tough times.’


have the right people? “Do they have 18 salespeople when they need 24?” he asked.


investors gave case studies and answered questions about their experiences.







to evaluate all their options themselves. Although Chrysalix is a venture capital firm, Dr. van Lierop developed a new model because he thinks that traditional Venture Capital has “no clue” about clean tech. Chrysalix has on board not only engineers with experience in industry, but also relationships with angel groups, university labs and incubators where new ideas are being born. Looking for very early stage companies, he considers a wide range of new technologies, including: ƒƒ 2nd generation renewable energy, such as fusion; ƒƒ storage and the built environment; ƒƒ resource management; ƒƒ nano-steel that reduces the use of steel in cars by 30%; ƒƒ and more. Dr. van Lierop was at the World Bank and then McKinsey and Company. He became frustrated because no matter how much work he and his associates did, the decisions were made behind closed doors. He left, joining the West Coast Energy board (which merged with Duke Energy) , and then began his own business in 2001, with substantial backing from Shell, West Coast Energy and others. His investors are blue chip corporations in finance (CitiGroup and Credit Suisse), utilities and oil companies. Once a month, his firm holds a 1 hour quick overview of new companies within selected sectors, sometimes picked based on requests from corporate investors who want to learn more about that sector. The monthly phone calls are augmented with an annual round table, where 15 senior executives meet to share wisdom and learn about new trends.

What investors get from working with Chrysalix is a window on new technologies; a way to find technologies that are incremental to their core business or that may be relevant in the future; and to be aware of what other companies are looking at and thinking about. He says there have been challenges: How do you change innovation in a very large company? How do you coordinate internal and external R&D? And how do you integrate new technologies into a larger business? One company decided that its record of integrating new companies into existing ones is so poor, that for the first two years no one is allowed to touch a new acquisition. But since the success rate of in-house R&D is around 15%, according to a former McKinsey executive, Chrysalix only needs to bring one successful company into a corporate fold to show their unique value.

He concluded by saying, “We have to adjust the venture model in the clean tech space. The world has evolved, and large corporations are realizing that green sourcing and innovation is a very real thing.” *“The catbird seat”: an idiomatic phrase used to describe an enviable position, often in terms of having the upper hand or greater advantage in all types of dealings among parties.

ESG moving beyond risk management into value creation.




For medium and large companies, many of whom are increasingly looking to private equity for capital expansion, having ESG practices in place can be the differentiator — and the assurance to fund managers — that the company is managing their future risk, costs and opportunities. For investors, especially large public institutional investors like CalPERS, such metrics provide a baseline, indicating that funds and companies in which they invest are


In the 1960s Milton Friedman argued that social responsibility was bad for a firm’s financial performance. He believed that the valuation of a company or asset should be based on a pure bottom line, a thought that has prevailed since the ideological shift to neoliberalism. In 1988 James S. Coleman challenged the dominance of the concept of ‘self-interest’ in economics, in his article Social Capital in the Creation of Human Capital, introducing Social Capital as a measure of value.


The surprise is that ESG — Environment, Social, Governance — once the domain of socially conscious investors and mission focused non-profits, is now becoming mainstream for corporations and investors. ESG is being used by multiple stakeholders to gauge how a corporation is responding to — and reporting on — metrics beyond the ‘bottom line’.






22 doing a level of due-diligence needed in the new economy. A recent webinar hosted by Dow Jones, ESG: Is Your Firm Prepared For LP Questions? brought together a team of investors from a variety of asset classes to discuss their approach to ESG as a way of evaluating companies and funds for investment. The webinar, still available online, set the stage for an important conversation on: ƒƒ How funds are using ESG as a gauge of business health and potential longevity; ƒƒ The evolution of what Limited Partners are looking for when seeking to invest in new funds; ƒƒ What the future of reporting is likely to look like for corporations; and ƒƒ The need for universal metrics.

typically are managing everything well. A company that is not tuned into this agenda is probably missing an enormous amount that matters on the radar screen of their corporate strategy.” CalPERS, with $235 billion in assets, includes ESG in their due diligence, asking for information on processes, what policies are in place, existing reporting procedures and more. Their policies include funds and fund-of-funds, which means that General Partners must have practices and reporting structures in place for their portfolio companies. When asked if funds or companies that did not report would be qualified for investment, she answered that a company could say, “no” to the questions, but would need a good explanation why such metrics were not relevant to its business.

How funds are using Evolution of what ESG as a gauge of business health and Limited Partners are potential longevity seeking For many investors, especially the large public funds whose employees are dependent on the funds’ success for their pensions, ESG is a basic requirement. As Anne Simpson, Senior Portfolio Manager of Investments & Director of Corporate Governance at CalPERS (California Public Employees’ Retirement System) said,

“Our conviction is that companies which manage these issues well

For firms looking for Limited Partners to invest in their funds, the landscape has been challenging. Tom Murray, Managing Director of Corporate Partnerships at the Environmental Defense Fund (EDF) added,

“The trend is that there will be the same aggregate capital allocation to late stage private equity, but probably to half the number of funds. So how do you ensure that you’re one of the

Opportunities for environmental value creation exist throughout the investment process & PE firms are well positioned to take advantage.

He noted that there is “nothing resembling a standard.” The UN IPC is a bit like a Hippocratic oath: a good set of guidelines to consider when forming policy. As a result, funds are looking at what the early adopters are doing, and reverse engineering their own approach, or working with consultants, like Malk Sustainability Partners, to form their own policies.

For mid-market companies and funds, he believes that ESG is a source of competitive advantage. In addition to savings from operational costs, commodity risk is a looming problem that more companies are having


A new report sponsored by Dow Jones and produced by Malk Sustainability Partners, surveyed 13 general partners and 6 limited partners. 92% of the respondents said they planned to increase ESG metrics, processes and/or capabilities in the future, while over half currently used ESG processes to increase value in their portfolio. The report results, available in the webinar, outlined the approaches being used by private equity.

In addition, much of the activity in the market is around the transformation of infrastructure — transportation, energy, water — which is a very different model than IT. As a result, Private Equity is evolving, focusing more on organizational development. ESG is “another tool in the toolbox.”


ƒƒ Growing interest and pressure from investors for transparency at all levels. ƒƒ An incredibly competitive fundraising environment, in which expanded due diligence is seen as a differentiator. ƒƒ Challenging economic times, leading to longer hold times, which demands a focus on operational improvements. ƒƒ o Changing expectations about what value creation means: a growing expectation of shared value leading to strong returns for investors, higher corporate performance and more motivated employees.

ƒƒ More competition, ƒƒ Not as much equity available, and ƒƒ Not as much of a ‘tailwind’ from high EBITDA multiples on exit.


Mr. Murray, who has worked with large investment firms such as KKR (Kohlberg Kravis Roberts), added that ESG reporting is being fueled by:

Andrew Malk, Managing Partner of Malk Sustainability Partners, the author of the study, (which is available free online) elaborated in further conversation. He said that it is tougher for Private Equity to get the kind of returns they had in the past, as there is:


funds that can continue to raise your successive funds? We think that having these tools show that in the future of a more complex environment, you have all the capabilities necessary; [ESG] being one of those.”






24 to take into account. Policies to manage — and in some cases profit from — such risks can set a firm above the competition.

“Operating companies don’t have to be Unilevers. The percentage of returns is the same for large, medium or small firms.” Another driver is that large companies, which are often the customers for midmarket companies, are driving mid-market adoption by setting their own targets, along with developing a supply channel code of conduct. He concluded by saying, even the mid-market funds, like Oakhill Partners, are starting to develop policies. And this will drive the need for ESG practices further down the supply chain.

What the future of reporting is likely to look like for corporations In some ways, ESG is a moving target as it measures both intangibles — such as community good-will and employee satisfaction — along with tangibles, such as energy and water use, waste management, chemical process and so forth. Many CSOs (Chief Sustainability Officers) are using one or more evolving reporting protocols (see next page), but those are continually evolving as

more information is available. Some won’t have their new forms available until 2013. Don Anderson, Chief Sustainability Officer at Blackstone, a Private Equity firm with over $161 Billion in investments, started as a consultant. His first looked for no cost, low cost, fast-turn-around dollar savings with environmental benefits within Blackstone’s existing portfolio. He was aided by a good operations department. It seems that Mr. Anderson’s work had clear benefits, as he was hired on as CSO. One of his approaches is to develop best practices that can be used throughout similar portfolio classes. For example, he mentioned that Blackstone has more hotel beds than ‘anyone’. As a result, he has been able to find criteria that work for a wide variety of corporations, with both savings and efficiencies. Another approach has been to introduce practices into a small division of a larger company, evaluate the success and failures, and then bring those practices industry-wide. He went on to say that 54% of their portfolio companies now have ESG practices that go beyond risk management and cost savings, addressing access to new markets and driving innovation. 93% expect to increase their focus in the coming months. He told of one instance where the fund of a noted organization included a right to suspend capital calls if the organization failed to meet agreedupon ESG targets.

NonProfit Resources Environmental Defense Fund (EDF)

Stated goals or purpose

Ceres mobilizes a network of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy. Ceres focuses on providing credibility, expertise, and experience in driving sustainability leadership and best practices.

Pragmatic environmental advocates who believe in prosperity and stewardship. Grounded in science, they forge partnerships and support market incentives. EDF works with companies rather than against them. For 20 years, they’ve worked with leading companies to re-shape their industries.

Works directly with members. Self Assessment questionaire for nonmembers.

No. Can work with other public reporting frameworks.

Yes. Webinars, Podcasts, Videos for non-members.

Yes. Case studies, videos.


incorporating ESG metrics is a better way to invest for higher returns. KKR has over 60 companies in their portfolio, of which they have helped jump-start 23.

“This kind of leadership is setting the pace, using ESG as a proxy for a ‘well run company’.”




What is exciting for EDF is to see the way that Private Equity, from the mega firms Research The Road to 2020: News and Blogs. and Corporate Progress on Annual Reports. to the mid-market, is lookReports the Ceres Roadmap. ing at generating value for List of No. Investor members Partial, with case studies. the long term. He sees a Partners Yes. Corporate Members trend to move toward opDatabase of Not found on website. No. erational improvement over Submitted financial engineering. The Reports goal is to find transparent Tom Murray, who is the Managing metrics that can be duplicated, echoing Mr. Director of Corporate Partnerships for the Anderson’s approach at Blackstone. Environmental Defense Fund (EDF), has been working with investors for some time. He believes that mid-market adoption is critically important as the policies of the The need for more transparent metrics is Fortune 500 trickle down along their supply a major problem for many starting to look chain. His ESG lens is formed by working at ESG. There are five widely used public with large funds, like KKR and the Carlyle protocols, such as the UN PRI (Principals Group, who started looking at reducing on Responsible Investing), CDP (Carbon emissions and waste as early as 2008. Using Disclosure Project), the Global Reporting the EDF’s 25 years of partnering with the Index and others. Many firms work with conlikes of Fedex, McDonalds, and Wal-Mart, sultants from companies like KPMG, PWC Mr. Murray found that Private Equity was a and nonprofits like Ceres, and those organifaster way to help convince companies that zations are also working with companies to Support/ Help


Ceres (PRI)




Reporting Frameworks UN Principles of Responsible Investing (PRI)

The Carbon Disclosure Project (CDP)

Global Reporting Initiative The Climate Registry (GRI)

Stated goals or purpose

The Principles were devised by the investment community. They reflect the view that environmental, social and corporate governance (ESG) can affect the performance of investment portfolios and therefore must be given consideration by investors if they are to fulfill their fiduciary (or equivalent) duty. The Principles provide a voluntary framework for investors.

When provided with the necessary information, market forces can be a major cause of change. CDP works with investors, businesses and governments to catalyze action towards a more sustainable economy. CDP provides a global system for companies and cities to measure, disclose, manage and share environmental information.

GRI selects a sample from the S&P 500 and other indices, requesting they report. The G3.1 and G4 reporting structure has evolved with input from industry and consultants, as well as a lengthy public disclosure and feedback process. Grades from C to A+ reflect the reporting entity’s level of reporting, not necessarily its level of ‘green’.

The Climate Registry is a nonprofit organization that provides information to reduce greenhouse gas emissions. The Climate Registry establishes consistent, transparent standards throughout North America for businesses and governments to calculate, verify and publicly report their carbon footprints in a single, unified registry.


Complete reporting framework and data collection tool.

Framework PDF.

Level 3.1 Reporting Initiatives (Level 4 available in 2013).

Climate Registry and Reporting System (CRIS).

Support/ Help

‘Work Streams’

Consultant partners, reports, case studies, webinars, and ‘Report Check’ of submissions.

Training, workshops, supply chain support, and more. Support for 12 sectors. Conferences.

Climate Leadership Conference Training, webinars, reports, case studies.

Research and Reports

Publications: Annual reports, case studies, ‘lessons learned’ and more.

CDP S&P 500 Climate Change Report 2012 On behalf of 655 investors with assets of US$ 78 trillion.

Report: Carrots-AndSticks-PromotingTransparency-AndSustainbability.

Reports available online. Draft GRP 2.0 Reporting Protocol

List of Signatories


Signatories: investors and corporations.

Not found on website.

Yes. Searchable by sectors.


Not found on website.

Yes. Searchable database.Voluntary by reporting entity.







Database of Not found on website. Submitted Reports

help them develop best-of-class approaches to ESG. Mr. Murray sees the GRI (Global Reporting Initiative) as a first step. “It’s where the rubber meets the road,” he said. He cited a project with Oakhill Capital Partners, a mid market firm relatively new to ESG. EDF and Oakhill developed a process to evaluate 3 metrics for operational processes: Environmental Performance, Energy Efficiency, and Waste Management. They

also looked at companies positioned to take advantage of operational savings, that also had a committed customer base ready to support new initiatives. Developing a 2x2 matrix, they selected 20 mid-market companies that fit the profile, and that’s where Oakhill invested. He added that every year EDF trains Business School graduates and deploys them in various companies throughout the summer. This year, 97 students, their largest

group, trained in organizations ranging from Google to the Boston Public Schools.

“Three to four years ago, these approaches did not exist. Today they are becoming a normal part of doing business,” He said.

4. We will promote acceptance and implementation of the Principles within the investment industry. 5. We will work together to enhance our effectiveness in implementing the Principles. 6. We will each report on our activities and progress towards implementing the Principles.


While ESG is ‘just good business’, companies that start building capacity now are

3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.


Legislative Head Start

2. We will be active owners and incorporate ESG issues into our ownership policies and practices.


She mentioned that the driver for mid-market companies, is the larger corporations including ESG measurements in their RFPs or supplier questionnaires. Companies like Intel and Bank of America are looking to clean up their supply chains, and those that are ready for the questions are in a better position to compete. Although they primarily work directly with large corporations, they recently produced a set of guidelines for smaller companies, “The Supplier Self Assessment,” which can be downloaded from their site.

GRI Principals

1. We will incorporate ESG issues into investment analysis and decision-making processes.


Another nonprofit providing guidance for corporations is Ceres, which recently published its 20th Century Roadmap for Sustainability. Taking a slightly different tack, they look at governance, disclosure, stakeholder engagement and performance. Focusing on performance, Andrea Moffat, VP of Corporate Programs at Ceres, said corporations need to have their targets in place, but that those targets should be tied to compensation so everyone from the CEO down the line is driving toward the same goals. She added that different sectors have different objectives among operations, supply chain, product & services, transportation logistics, and employees.

likely to get a head start on coming regulations. Cities like New York, Philadelphia and Chicago are imposing fines and codes on new construction or retrofits for existing buildings. As water quality and shortages become prevalent, municipalities are creating mechanisms to charge corporations for water use and storm-water runnoff. Large corporations, with a stake in new legislation, are likely to have significant input that will protect their investment or policies. As the ‘stick’ in the ESG equation, figuring out what metrics work best for a given corporation can make them ready to have their best practices incorporated in to local codes.

27 Dow Jones Webinar






28 Case Study

Campbell’s, a Fortune 500 company, has been around for a very long time. One might think its hold on the market is secure. Yet by 2000, after years of layoffs, closings, and cost reductions, the future of Campbell’s seemed less than clear. Wall Street was not charmed; employee morale was at an all-time low and the brand was losing to stronger competitors


A Company with a History Makes Bold Changes for the Future


Wall Street has generally relied on a metric focused on short-term financial gains. Today, many are asking whether this reflects true corporate value. Campbell’s has been demonstrating the success of a sound, long-term strategy, becoming leaders in both financial and corporate social sustainability. The lessons they are learning can inform capital ventures looking for a way to outlast the competition through a broader understanding of what constitutes success.


Being both socially responsible and profitable is becoming necessary amongst elite United States corporations. Campbell’s Soup [CPB: NYSE] has been leading the way for over ten years, turning their corporate social responsibility plan into an engine that drives profitability.








30 like Progresso. At that time, Campbell’s was shaping its venture based on the conventional wisdom of the market: balance sheet, balance sheet, balance sheet. But as Ed Catmull recently commented in a Harvard Business Review blog, Pleasing Wall Street is a Poor Excuse for Bad Decisions:

“Managers who focus on maximizing short-term profits end up driving out things that generate long-term value — like R&D. They use all sorts of excuses when they make those decisions, including the need to please Wall Street and create shareholder value. But they’re just excuses for poor thinking.”

Looking to reverse these trends, Campbell’s began to focus on what it would take to create a sustainable company – sustainable in more ways than the bottom-line. Yet these changes could not happen only from the top down. It required the involvement of the entire Campbell’s world, including the Campbell’s family, board members, employees, and investors. Its whole culture needed to change. Campbell’s is a business in which members of the original family own almost half of the shares. According to the 2008 Annual Report, Campbell’s Board of Directors own more than 44% of the common stock. At its low point, Wall Street analysts considered

Portrait of a ‘VP of Measurability’ “When I started my career, there wasn’t such a thing as a VP of Social Responsibility or Sustainability,” said Dave Stengis. His first job as a CSO was at Intel: a make-it-up-as-you-went-along task, which gave him guidelines for his job at Campbell’s. “I have always tied to drive business change,” he added. He believes in defining and setting targets within the company. “You don’t need 1,000 metrics,” he said. “You may only need 10.” He starts with what “we wish we could measure, and how sustainability can drive the intelligence of what you measure. At Campbell’s, the challenge was a global company with over 18,000 employees. When he started, he found that he would need to bring very diverse divisions, and especially human resources, into the metric world. At that time, although the existing operational data was often lacking, it showed some hot spots.

the very foundation was the desire to build competitive advantage and relationships with long-term investors. Theirs is a story of reaching for greater sustainability as a way of achieving a greater competitive edge. The approach as expressed by Mr. Conant:

He concluded by saying, “Food. We are in the business of nourishing our planet. I enjoy food more than tech.”


As an example, Mr. Stangis talked about packaging: every ton of packaging taken out of the waste stream is dollars saved. But the starting point is a measurable baseline, and the second step is employee engagement. Once the output is known, then ongoing reduction becomes self perpetuating by people on the ground, who are the ones to see opportunities for improvements.

He added that a critically important factor was the support of the executive team. The VP of Investor Relations loved the new approach, but the CFO, who was relatively new when Mr. Stangis started, needed to see real results. Then he became a fan. “By the time you get to be CEO, what we see as opportunities, they see as risk. In order to convince the current management team, you have to have — and be able to support — a business case.”


Based on what existed, his first task was to settle on a series of measurable metrics, and then to work throughout the company to collect data, help managers see opportunities for savings and efficiencies, and then to reduction goals. As he said, “We learned a lot. After all, we go from growers all the way through to consumers.”


Under the leadership of a new CEO, Douglas Conant, the company began to refocus on the principles of long-term investments on a variety of fronts, not least of which was their powerful commitment to environment, social and governance (ESG). Though underlying the business decisions that would make Campbell’s a greener company, at

“This is a long-term turnaround plan. If look at my background, it’s not about turning companies around in a ‘quickfix’ fashion; it’s about building them to be competitive in the near term and superior in the long term. You can’t talk your way out of something you behaved yourself into.”


Campbell’s a good take-over target. But the family was not interested in a quick sell and looked for someone who would champion a turn-around that would embrace sustainability. In the recent era of growth through mergers and acquisitions, the Campbell’s story is a standout of steadfastness and commitment to the long vision.




Engaging Campbell’s Insiders is a Powerful Catalyst to Corporate Strategic Planning

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Companies generally fall into one of two broad categories: Those that have top-level support and those where ESG is driven from a grass roots level. Both groups can achieve world-class status and they both have similar challenges in the middle. Campbell’s chose to take a combined approach by engaging both those at the top and those at the support levels in their move toward a greener business strategy. It started from within by presenting management and employees alike with the challenges. As Dave Stangis, now Campbell’s Vice President of Public Affairs and Corporate Responsibility noted, Campbell’s has a constantly evolving process occurring in real-time. What this means is that division heads are tasked with not just reporting, but actively engaging in designing new

approaches to meet the corporate strategic plan. Secondly, the company has focused on creating a better product that consumers will love, while being strategic about energy and resource use in order to save throughout the production chain. To find the best ideas for innovation and efficiency, Campbell’s began a series of events that not only kept employees informed regarding business priorities and progress, but also encouraged interactive dialogue on important topics. This kind of employee engagement not only taps into hidden in-house talent, it also makes working at Campbell’s more fulfilling and interesting, which has improved employee retention and productivity. As a result, in 2007 and 2008 Campbell’s was recognized by Gallup as one of the ‘Best Places to Work’ in America. Campbell’s attributes this as one of the reasons for their improved marketplace performance. In fact, in 2008 the company attained the coveted Gallup 12:1 ratio of engaged to disengaged employees, putting them into a world-class

“The most dramatic positive environmental impact in terms of tangible benefits is the issues of energy and water,” posits Dave Stangis.

The goal is to reduce greenhouse gas emissions by 50% per tonne by 2020, partly through getting 40% of all electricity from renewable, greenhouse gas-free sources. This has included a commitment, for the next 20 years, to buy 100% of a Napoleon, Ohio 9.8-megawatt solar panel project. This will provide 15% of Campbell’s Napoleon soup factory’s electricity. This agreement not only reduces greenhouse gases, but also stabilizes utility prices, reducing energy insecurity at the largest soup plant in the world. So far (FY2008 to FY2011) they have not yet met their long term energy goal, yet current practices represent a reduction of 404,005


The good news is that Mr. Stangis took the time to benchmark the current impacts of the programs, in order to demonstrate the efficacy of the ESG goals, all in an effort to prove that ecologically balanced practices



Buy-in from investors and board members is also essential to the success of a bold ESG plan, and for that a totally different approach is required. What Mr. Stangis, who started as the Chief Sustainability Officer, did was integrate the consumer and sustainability focused ideas from those on the production line into the financial goals of the strategic plan in such a way as to demonstrate that ESG is both brand-positive and a bottomline boon.

The following are some of the highlights of the 2010 report.


Bringing Internal Adjustments Down to Earth with BottomLine Thinking for Investors

are indeed profitable. Campbell’s has had a stellar performance. Their Corporate Social Responsibility Report lays out their current performance and future goals for consumer satisfaction, happy employees, community involvement, and sustainability.


level of employee engagement. By engaging their employees in this way, Campbell’s has helped foster a kind of citizen army for sustainability within their own ranks. Those passionate about the issues not only push for more efficiency on the production line through ideas for water reuse, energy reductions, and material conservation, they also help to encourage lifestyle changes throughout the company culture.






34 mmbtu of energy, garnering the company a substantial cost savings.


Given the close ties between water and energy, Campbell’s plans to reduce both.

“It’s hard to pull apart energy and water. We’re automatically impacting energy if we do something on water. And when we’re doing something on energy, we’re automatically changing something with water,” explains Mr. Stangis. Comparing FY2008 to FY2011, Campbell has been able to reduce water consumption by 16% from 10.33 cubic meters/tonne of food to 8.72 meters/tonne of food. Their Scorecard boldly proclaims that they have saved 2.8 billion gallons of water since 2008 through a variety of techniques and systems.

“The real benefit is reducing the amount of water and the number of times we use it and touch it. We reuse water and reuse water and save energy as well.” And that spells big bottom-line savings. Though all of these efforts have required $23.3 million in investments by FY2011, the company has already saved $27.5 million on energy and water projects.

Assuming changes already made will continue to provide ongoing energy and water savings, their efforts are something investors and board members can really buy into.

Packaging and recycling

Beyond the energy and water nexus lays big opportunities in material consumption reductions. Campbell’s goal is to achieve a 95% recycling rate. This worldwide goal will include everything from food waste to corrugated paper to steel drums to wood pallets and scrap metal. From FY2010 to FY2011, Campbell reduced its solid waste by 7% and achieved a worldwide recycle rate of 80%. By recycling or reusing 1.2 million pounds of equipment, the company has generated $700,000 in revenue from the sale of used equipment. They’ve also reduced plastic by 1.2 million pounds, and saved $850,000 by redesigning their packaging. Most importantly, as far as shareholders are concerned, for the span of time covered by the new sustainability plan, Campbell’s has maintained a 3.3% dividend increase with a steady, consecutive increase for the past eight years. However, it’s more than the internal stakeholders who have been pleasantly surprised with the achieved boons. Their efforts have not gone unnoticed by external evaluators. In September they were named to the Dow Jones Sustainability North America Index

for the fourth consecutive year, as well as to the Dow Jones Sustainability Index for the third consecutive year.

Navigating the Road to Greater Sustainability and Profitability It hasn’t all been roses and rainbows along the way. One of Campbell’s most recent moves was to close down a dated Sacramento plant in July 2013, which will displace 700 employees. Another bump in the road has been the issue of BPA use in Campbell’s food tins. After false reports of the company’s commitment to remove BPA from their production line were released, key leadership didn’t rebut the claim. Thinking it would only hurt their reputation, they quietly allowed consumers to believe the rumors about eliminating BPA, while telling those who asked that they would be using BPA for the foreseeable future. Although few

noticed, this misstep could have left a mark on their reputation. Nevertheless, any story of adventure into the unknown includes some missed footsteps and the occasional tumble. Overall, Campbell’s commitment to ESG now has a ten or more year history, and, as important, their numbers are proving that developing a profitable company that looks beyond the bottom line is not just possible, but very good for business. If their projections for future savings hold true, one could say it is a roaring success. Competitors, be warned.



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APOWERFUL SOLAR LAMP WITH PLANS TO LIGHT THE WORLD The company is now launching a program specifically designed to meet the needs of NGOs (Nongovernmental agencies) working to bring light and better health to the 1.5 billion people living off the grid.

The costs of kerosene lamps for those living with energy poverty — indoor air pollution, fire hazards, environmental sustainability, low educational outcomes, and high fuel prices — are familiar problems for nonprofits in developing nations. Replacing kerosene with solar lighting for the bottom-of-the-pyramid consumers is a worthy goal. However, financial concerns and functionality issues frequently make such purchases impossible. The high costs of charging capabilities along with energy storage disappointments have left many disillusioned with the idea of solar lighting. This is especially true for non-profits working in communities where wasted investments can have a devastating impact on levels of trust. Addressing this issue is the Waka Waka Lamp. “The single most efficient solar lamp on the planet” according to the inventor, Off-Grid Solutions.


he lamp offers exceptional performance in even the most demanding conditions. Not only has it been verified to be the most efficient solar light available, review after review confirms that it’s durable, extremely powerful, and outstandingly practical. This list of amazing features tells it all: ƒƒ 16 hours of bright power from a full day’s charge with a 2:1 use time to charge time. ƒƒ Water-resistant. ƒƒ Uses three rechargeable AA batteries (included). ƒƒ Five different light modes, including an SOS beacon. ƒƒ Priced within reach. ƒƒ Can be used to charge other devices, such as cell phones. With functionality issues solved, WakaWaka turned to overcoming cost problems. By offering two nonprofit pricing programs, WakaWaka makes it both feasible and economically effective to bring solar lighting to target communities. The first program provides direct-to-non-profit (registered 501 C3 organizations) pricing with low

minimum purchases (4 case packs | 96 WakaWaka Solar Lamps). The per-unit costs of this program make WakaWaka Solar Lamps affordable both for those funding programs or offering products to local communities at a subsidized rate. Secondly, non-profits can fundraise by retailing WakaWaka Solar Lamps using a host of provided tools – landing pages, email templates, and web-based marketing solutions. This program allows non-profits to earn credit applicable to future WakaWaka purchases at non-profit pricing. Finally, WakaWaka’s programs encourage two or more non-profits to work together to purchase their lamps, with even lower per-unit pricing. A non-profit that takes advantage of both programs, plus the collaboration incentive, can easily finance the purchase of thousands or millions of lamps for nearly nothing.


nd that’s WakaWaka’s hope. To learn more about how qualified non-profits can take advantage of Off Grid Solutions’ programs for non-profit organizations, please contact: Victor Brandstetter Senior Partner Digital Concepts 2.0 925-437-8345




“To invent, per chance to profit” – Reality

Few new technologies are hot licensing items or market-ready upon discovery. Before you see dollar one, your invention most likely will require significant post-discovery development as proof-of-marketability and product performance. Discovery is a milestone for successful inventions.

Scientific proof-of-concept, even if patented, usually is not enough. Take this stage very seriously. Post-discovery development applies to most inventions in most industries. Some are more extensive and expensive than others. Remember, as soon as you introduce your new technology to the world, other inventors will scour your newly invented technology to find limitations in your design, and to find complementary, supplementary, and competitive science — and therefore patents — for themselves. For you, post-discovery

development might reveal additional patents to file that enhance market and licensing value of your technology. What seems great in concept may not perform as well outside the lab. For example, Scotch tape didn’t sell well until 3M invented the dispenser. In post-discovery development you will find and work out the kinks. Post-discovery development helps ensure that your technology is complete, practical, and enduring. If you leave science on the table, then you’re

leaving money and reputation on the table too.

Protect Your Rights with a Provisional Filing

A provisional patent filling protects your invention for one year. And it costs, in total, much less in dollars and days than filing a full patent application. Note that as of 2012, the United States is on a ‘first-to-file’ basis (joining other nations, including Europe, who

have been doing so for a while). ‘First to file’ makes filing a provisional patent more important than it has been in the past. Without ‘first-to-file’, an inventor can be trumped in getting a patent approved … or retained. After filing for a full patent, another inventor can show up and prove to the U.S Patent & Trademark Office that she invented it first or established ‘prior use’, even if she did not yet patent the invention. With ‘firstto-file’ you can only be trumped by another inventor, filing either a



provisional or full patent application first. There are some other benefits to filing a provisional patent, which allows for a full year of protection: ƒƒ Before publishing or otherwise releasing your patent application to the public – and other inventors to see for a year; ƒƒ To enhance the technology and practical application in the post-discovery development process; ƒƒ To raise funds from grants, contracts, or investors after you have proven concept – after discovery – which is usually easier than before discovery. You can share some (or all) of your discovery to investors and advise them that they might be violating federal or state securities laws if they then disclose your information to third parties without your authorization.

Funding patenting, post-discovery development, and initial commercialization:

After filing for a provisional patent, and once a post-discovery development plan is in place,

you will need your partners, investors, or a university to fund $25,000-$50,000 for a full patent application as well as post-discovery development. Most likely, they will ask you for a 3rd party evaluation of commercial viability (3rd party pre-cash valuation) and, perhaps, a commercialization strategy. The 3rd party commercial viability evaluation includes: ƒƒ Identify initial 5 year target markets for end users for your new technology; ƒƒ Determine whether it will complement, supplement, or replace the current technology; ƒƒ Measure the market size and trends; ƒƒ Estimate your likely market share; ƒƒ Project your technology’s performance – the annual revenue over the initial 5 years – based on the market’s size and your estimated market share; ƒƒ Compare your projected revenue against projected costs for production and sales/marketing. Remember, these are just estimates and projections and you will include the information and sources on which you based

these estimates and projections. It just has to be reasonably cautious. It has to make sense.

Commercialization Strategy

At a minimum, your partners and investors will pay for you to define a commercialization strategy. Based on 3rd party evaluation, your commercialization strategy should develop recommendations on whether to: ƒƒ Market organically or outlicense to another company with an existing marketing infrastructure; ƒƒ Out-license all rights, or to restrict rights to certain markets and uses; ƒƒ License rights to one company, or to several, based on their relative capabilities in each market. Once this has been decided, you can propose initial steps, set out the assumptions for selecting your commercialization strategy, and outline financials associated with them. Some common post-discovery development steps: ƒƒ Translate your technology into tangible, fully functional products by constructing

prototypes. You need to do it right up front, because if you don’t, should a later prototype not work up to specifications, you will have lost credibility among investors and licensees; ƒƒ The prototype should be tested by end users through ‘durability’ and ‘safety’ testing. It should also meet the minimum required by law, standards, convention, and/ or insurance, and take into account the requirements of geographies and industries; ƒƒ During this process you can review your materials for long-term availability, price stability, and cost as compared to alternative materials. Eventually, your company - or your licensees will manufacture the products in large quantities to sell; so this matters a lot. Sometimes the best choices scientifically – the ideal choices – are a nightmare to manufacture. Look into multiple product applications for your new technology because they likely exist: ƒƒ The main product which you have in mind might not succeed as quickly or as well as you expect; ƒƒ You might be missing out on substantial additional sales or

licensing royalties; and ƒƒ You will be deciding on whether to license a product application or geography, and, if so, how many different licensees vs. exclusivity to one licensee.

Know what you own and your legal responsibilities towards ownership:

Have a legally binding paper chain clearly confirming who owns the intellectual property rights and how much of the rights each owns. Prospective investors and licensees will require the documentation before proceeding to serious negotiation steps. Note: You can forfeit the exclusive rights of ownership and licensing (per “Bayh-Dole Act” or Patents & Trademark Act Amendments of 1980; PL 96-517), because you have an affirmative responsibility to commercialize the technology and share the proceeds reasonably with the actual inventors if any of your funding came through the U.S. federal government – grants, contracts, co-development – or you are a university, non-profit, or small business.


Expect a substantial post-discovery development stage to prove and proceed with the marketability of your invention. Prepare a 3rd party commercial viability evaluation and commercialization strategy for investors and partners who will pay for the post-discovery development. Build working, compliant prototypes for endurance and safety testing and review the availability and cost of your bill of materials. Confirm with a legally solid paper chain that proves ownership and intellectual property rights to your invention.

Steven J. Reichenstein holds an MBA in marketing from Syracuse University and BA in economics from Tufts University. He has 20 years experience with pharmaceuticals such as Johnson & Johnson Ethicon, Merck, SanofiAventis, and US Healthcare (now Aetna Health Plans). He served as Publisher of Managed Healthcare Executive before starting Biomart Global in 2008. Biomart Global focuses on licensing for post-discovery development of technologies now on shelves at universities, non-profits, and small businesses.


TGE | 42


CONNECTICUT PARTNERS WITH PRIVATE INVESTORS The Clean Energy Finance and Investment Authority (CEFIA) has become the poster child for the green financing industry. CEFIA’s evolution began in July 2011. Its business model — providing financing tools aimed at partnering with the private sector in order to support clean and efficient energy in Connecticut — has caught the eye of several other states looking to follow suit. In an exclusive interview with THE GREEN ECONOMY, David Goldberg, Director of Government and Legislative Affairs, discusses CEFIA’s evolution and plans for the future. Interiew by Kelly Velocci, special to THE GREEN ECONOMY.

“With CEFIA’s new focus, we are really concentrating our efforts on leveraging private capital investments, instead of employing them as one upfront refund, rebate or subsidy.”

Could you describe CEFIA? The Clean Energy Finance Investment Authority – CEFIA – is successor to the Connecticut Clean Energy Fund, created in 2000. The legislation, passed a little over a year ago, was truly a bipartisan effort in the state of Connecticut. It brought together both sides of the isle in support of the idea that there is an opportunity to better use the limited public dollars available and to use those monies to attract private capital. With CEFIA’s new focus, we are really concentrating our efforts on leveraging private capital investments, instead of employing them as one upfront refund, rebate or subsidy. CEFIA’s goal is to use financing tools: loans, leases, interest rate buy downs, loan lost reserve, and fund support to help us achieve our clean energy goals. What types of projects do you usually finance? Well, one example is our statutory requirement that CEFIA create a residential solar PV program. The broad concept was to achieve at least 30

megawatts of new installation in less than 10 years, and to use no more than one third of our ratepayer dollars. That’s the statutory goal.

capital at the tune of anywhere between five and ten to one. For every $1.00 we put in we are hoping to see $5.00 to $9.00 of private investment.

Internally we have a goal which exceeds that: support more than 30 megawatts with less than one third of the money and do it in less than ten years.

The overarching mantra of subsidies and rebates is a way of the past. We are going through a process of transitioning away from rebates and subsidies.

The whole concept of this program is a declining incentive structure. For each round of the program we go through, the incentive level will go down. As time passes, and we achieve various target points, the amount of rebate or incentive provided to the end user will also decline. The idea is that as demand goes up and we achieve scale, we will be able to utilize cost savings.

How do you plan to achieve that goal?

In turn, we can create industry push back. We can say: “You have to figure out ways to support residential solar PV with less and less rate payer subsidies.” Where historically we would give a $1.00 and private would bring in a $1.00. Now, the new model is focused on leveraging private

To start, what CEFIA has done the last year and a half is a 4:1 ratio. For every dollar of ratepayer or public money, we are seeing about $4.00 of private funding enter the game. Secondly, throughout the next 24 months we intend to use about $30 million of ratepayer funds to attract close to $150 million in private capital through a variety of partnerships and program opportunities. This $180 million will be used to support residential, commercial and industrial markets, as well as “mush” markets (municipal and state governments, K-12 schools, universities, colleges and hospitals).


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Do the ratepayer dollars need to come from Connecticut? CEFIA is one tool in the state of Connecticut to help achieve the state’s clean energy goals. But CEFIA’s primary goal is to finance, develop, create, research and ultimately bring to the market a portfolio of financing tools in partnership with private investors. We have a per kilowatt-hour charge to electric customers of the major electric utilities: Connecticut Light and Power and United Illuminating. Every month ratepayers contribute a small amount posted on their bill and that money is brought to CEFIA and its sister/partner organization, The Energy Efficiency Fund. The monies collected under the ‘public benefits fund’ are used, invested and made available to support energy efficiency and clean energy holistically here in the state of Connecticut. So now the idea is instead of taking the money being collected from those ratepayers and handing them back as rebates or other incentives that ultimately never come back to us, through the financing solution we are going to make these investments of rate payer dollars and over time, those dollars are going to be recouped and repaid.

Who will you not finance? The technology has to be commercially viable. We want to support the deployment of viable resources. We are going to look at their managerial capability, financial viability and their technical capacity. As much as possible, we are looking to develop a suite of financing opportunities for financial institutions, as well as homeowners, business and municipalities. We plan to expand into the residential, commercial, industrial and nonprofit space.

“The overarching mantra of subsidies and rebates is a way of the past. We are going through a process of transitioning away from rebates and subsidies.”

“For every dollar of About David Goldberg As Director, Government and External Relations, David focuses on creating and sustaining relationships for CEFIA on behalf of Connecticut ratepayers. David Goldberg provides direct strategic advisory support to the President and CEO.

ratepayer or public money, we are seeing about $4.00 of private funding enter the game.


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