KKR has invested an undisclosed amount in environmental and ecological solutions company Resource Environmental Solutions from its Americas Private Equity Fund XI.
RES, which began in the wetland state of Louisiana, provides services to help businesses to create ecological offset solutions available under US regulations, including mitigation banking. The company says it has restored and conserved 155 miles of streams and over 40,000 acres of wetlands, and has 250 clients.
The investment will help RES expand nationwide from its current 10-state base, and possibly work abroad for projects with existing clients, RES chief executive Elliott Bouillion told Agri Investor. He believes there is a $4.5 billion market in the space. KKR global head of public affairs Ken Mehlman, head of Americas energy private equity Robert Antablin, and principal of energy and infrastructure Alex Shih will join the RES board of directors when the deal is closed.
“[Our work is] a way for someone in agriculture to obtain some income or lift from their property. We do a lot of work on restoring streams that might be running through [agriculturalists’] land. We will talk to them about water needs like fencing in cattle and building wells. That way they obtain income from portions of the property that may not have been very productive,” Bouillon said, adding that for farmers some ecological offsets or restoration is also compulsory.
RES also buys rural and agricultural land for restoration, targeting lowlands and wetlands in particular.
The company worked with KKR to do due diligence and estimate the size of the ecological offset market in the US.
“We joined … to go out and do a market study to gather data so that we could size the market and understand who needed the help. What parts of the world will be developed, really have a stress on water quality and so on,” said Bouillion. Many companies have trouble keeping up with what is an evolving regulatory market, he added.
KKR has a Green Solutions Platform which RES will join. The investment firm says it has invested over $5 billion in companies working on applying ecological solutions.
“This investment builds on our efforts to create value by improving environmental impacts at KKR portfolio companies and also by investing more than $5 billion in companies whose missions are to improve the environment, build human capital, promote health and solve societal problems,” said Mehlman.
Bouillion said the study gave KKR and RES “clarity of where we want to invest and grow” . He said RES could also potentially do business with companies on KKR’s portfolio.
“We will be able to leverage even more from KKR portfolio companies in the future. You will see some really innovative and interesting ways in the next few years where we will balance economic development with the environment,” he said, adding that rail and wildlife offsets would be important areas for further future growth.
Other investors such as Mark Canavan from the New Mexico Education Retirement Board have told Agri Investor that mitigation banking offers a growing opportunity.
“I don’t know how much velocity we have in the next 12 to 24 months, but the fact that KKR has decided to jump in the pool [is] indicative to me that this idea has taken hold,” he told Agri Investor.
“It is easily underwritten, return attribution is simple, and the industry has 40 years of federal statutes, rules and regulations,” he said in an interview earlier this year. NMERB has $26 million invested in mitigation through funds, co-investments and separate accounts.