Information required under the EU Sustainable Finance Disclosure Regulation (the “SFDR”)
Integration of sustainability risks
KKR Alternative Investment Management Unlimited Company’s and KKR Credit Advisors (Ireland) Unlimited Company’s policy on the integration of sustainability risks in its investment decision making process can be found at kkresg.com (including KKR’s Responsible Investment Policy).
No consideration of sustainability adverse impacts
KKR Alternative Investment Management Unlimited Company (“KKR AIFM”) and KKR Credit Advisors (Ireland) Unlimited Company (“KKR CAI”) are required to publish information on whether they consider the “adverse impacts of investment decisions on sustainability factors” (the “Principal Adverse Impacts”) under the SFDR. KKR AIFM and KKR CAI do not currently consider the Principal Adverse Impacts of investment decisions on sustainability factors in connection with all their products and services, as defined under and in accordance with the SFDR. This is because KKR AIFM and KKR CAI are not, in their view, currently in a position to obtain and/or measure all the data which they would be required by the SFDR to report, or to do so systematically, consistently and at a reasonable cost with respect to all their investment strategies to clients and investors. This is in part because underlying investments are not widely required to, and may not currently, report by reference to the same data.
In addition, the final regulatory technical standards which set out the scope of Principal Adverse Impacts and the corresponding mandatory reporting template have not yet been adopted by European legislators, and hence there remains legal uncertainty.
KKR intends to consider and report to investors, on a voluntary basis, applying the same standards as in the SFDR, the Principal Adverse Impacts of investment decisions on sustainability factors in relation to those strategies where it has sufficient influence and control on the investment and provide that information to investors in the relevant funds.
In practice, depending on the investment strategy and product, KKR considers a relevant sub-set of the “sustainability factors” listed in the SFDR, including environmental, social and employee matters, respect for human rights, anti-corruption and/or anti-bribery matters by means of its global policy on integration of environmental, social and governance risks and value creation opportunities into its investment process. For further information, please see kkresg.com.
With respect to certain investment strategies and products, KKR has applied established ESG-related standards which vary depending on the investment strategy. KKR is a signatory to the United Nations-backed Principles for Responsible Investment (PRI).
Date of publication: 10 March 2021.
Information on how remuneration policies are consistent with the integration of sustainability risks
KKR AIFM’s and KKR CAI’s remuneration practices are designed to promote sound and effective risk management and not to encourage risk-taking which is inconsistent with their risk appetites or the risk profiles of the portfolios which they manage. KKR’s Responsible Investment Policy sets out how its investment process incorporates consideration of ESG risks. Such risks form part of KKR AIFM’s and KKR CAI’s s assessment of risk for the purposes of its remuneration policy. KKR AIFM’s and KKR CAI’s approach to remuneration enables variable remuneration for employees to be adjusted for performance. This adjustment is not based solely on financial metrics. Qualitative non-financial performance metrics form a significant part of the assessment process. These metrics may include, for example, an employee’s failure to adhere to effective risk-management, to comply with applicable regulatory rules, unethical behaviour or other behaviour that is contrary to KKR’s Culture and Values. Consideration of these factors (including where relevant an individual’s contribution to ESG-related efforts) may form part of the employee’s performance assessment process. In addition, a proportion of the variable remuneration for employees may be deferred. This allows ex-post performance adjustments to be applied to deferred remuneration where risks, including sustainability risks, materialise in the future.