We believe that the thoughtful management of environmental, social, and governance (ESG) issues is smart business and see it as an essential part of long-term success in a rapidly changing world. KKR is committed to investing responsibly by integrating material ESG considerations into our investment processes globally across asset classes.
Responsible investment is a way of doing business that we believe makes us smarter, stronger investors. Thoughtfully managing environmental, social, and governance (ESG) issues in our investments can help us generate stronger returns for our Firm and investors, while also improving our companies’ impacts on society.
Our fiduciary responsibility to our investors lies at the very heart of all that we do. Now, more than ever, fulfilling that obligation requires us to also consider our responsibility to a wider range of stakeholders in our companies and communities.
We believe that our capital, operational capabilities, and long-term ownership model position us to be part of the solution. We are committed to working together – as one Firm – to manage ESG factors in our diligence process and in the management of our investments through portfolio company engagement and ongoing support. Though our responsible investment approach is dynamic and keeps pace with our investments and the world around us, materiality remains at its core. More information about how we think about materiality is available here.
We work to understand the impacts of the companies in which we invest and believe that our understanding of ESG issues can improve our opportunities to create shared value. In line with this belief, we have made a public commitment to formally incorporate the consideration of ESG factors into our investment processes.
Our work began in 2008 when we started to formalize our efforts to protect and grow value by proactively considering broader stakeholder issues as part of our investment process. In 2009, we became a signatory to the United Nations-backed Principles for Responsible Investment (PRI) and helped to develop the guidelines for responsible investing as a member of the American Investment Council. In 2013, we codified our own global Private Equity ESG Policy and began communicating it to our employees. In 2020, we replaced this policy with KKR’s Responsible Investment Policy, which articulates our approach to integrating the consideration of ESG risks and value creation opportunities into investment processes across various asset classes globally.1
These principles and this policy, included below, serve as valuable platforms for formalizing and focusing our responsible investment efforts, raising internal awareness, and providing a common language and set of expectations for our investment partners, our portfolio company management teams, and other stakeholders.
At KKR, a cross-functional, global team is dedicated to the management of our responsible investment strategy, implementing it across relevant asset classes, industries, and geographies. ESG issues are managed like other business issues and as part of the existing investment process. This means that internal experts at KKR partner across investment teams and geographies to enable and support the consideration of these issues in investment decisions. Our focus on remaining integrated, versus treating ESG management as a standalone activity, has become even more important as the organization has grown in size and complexity. Learn more about how we govern responsible investment here.
Just as importantly, we see the value of interacting with and learning from others who share this commitment. Therefore, we work regularly with our peers in these communities to help develop tools and resources and to learn from each other. We are deeply engaged industry efforts to drive more responsible investing as well as a network of partners to expand our expertise.
Principles for Responsible Investment
We also recognize that ESG issues can affect the performance of investment portfolios to varying degrees across companies, sectors, and regions, and through time. Therefore, where consistent with our fiduciary responsibilities, we commit to the following for PRI principles for our private equity investments:
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
American Investment Council Guidelines
In 2009, we helped to develop the guidelines for responsible investment as a member of the American Investment Council. In accordance with these guidelines, KKR’s private equity funds commit to take environmental, social, governance, and labor issues into account when making and managing investments:
- Consider environmental, public health, safety, and social issues associated with target companies when evaluating whether to invest in a particular company or entity, as well as during the period of ownership.
- Seek to be accessible to, and engage with, relevant stakeholders either directly or through representatives of portfolio companies, as appropriate.
- Seek to grow and improve the companies in which they invest for long-term sustainability and to benefit multiple stakeholders, including on environmental, social, and governance issues. To that end, American Investment Council members will work through appropriate governance structures (e.g., board of directors) with portfolio companies with respect to environmental, public health, safety, and social issues, with the goal of improving performance and minimizing adverse impacts in these areas.
- Seek to use governance structures that provide appropriate levels of oversight in the areas of audit, risk management, and potential conflicts of interest and to implement compensation and other policies that align the interests of owners and management.
- Remain committed to compliance with applicable national, state, and local labor laws in the countries in which they invest; support the payment of competitive wages and benefits to employees; provide a safe and healthy workplace in conformance with national and local law; and, consistent with applicable law, respect the rights of employees to decide whether or not to join a union and engage in collective bargaining.
- Maintain strict policies that prohibit bribery and other improper payments to public officials consistent with the U.S. Foreign Corrupt Practices Act, similar laws in other countries, and the OECD Anti-Bribery Convention.
- Respect the human rights of those affected by their investment activities and seek to confirm that their investments do not flow to companies that utilize child or forced labor or maintain discriminatory policies.
- Provide timely information to their limited partners on the matters addressed herein, and work to foster transparency about their activities.
- Encourage their portfolio companies to advance these same principles in a way which is consistent with their fiduciary duties.
KKR’s Responsible Investment Policy
Governance and Implementation
KKR’s senior leadership provides ultimate oversight of our responsible investment efforts. Accountability for this work extends throughout the organization with global and regional team members, supported by subject matter experts, collaborating to achieve strong outcomes.
In 2021, KKR created an ESG Council consisting of various members of senior management across our businesses. The ESG Council serves as a place to share emerging sustainability issues and best practice and ensure that our ESG-related priorities are being managed in each of our strategies. The ESG Council comprises approximately 20 Partners, Managing Directors, and Directors from our Client Partner Group, Credit, Capital Markets, Energy, Global Impact, Infrastructure, Legal and Compliance, Private Equity, Public Affairs, Real Estate, Strategic Growth, and Technology teams representing our regional presence across North America, EMEA, and APAC.
Where applicable, Investment Committees oversee ESG issues that are material to an investment when they are making a decision to invest. Our Portfolio Management Committees and investment professionals have monitoring and management roles with respect to material ESG issues that have been identified in the investment process.
KKR's Global Public Affairs team, an internal team of experts, represents the core of the ESG-related expertise at KKR. The team was formed in 2008 to serve as a resource to KKR, our professionals, and our portfolio companies. The Global Public Affairs team is involved in the due diligence process for most potential investments and also engages regularly with portfolio companies and external stakeholders. Overall, several individuals across KKR have roles in managing ESG issues, including investment team members and KKR's legal and compliance team. Investment Committees oversee ESG issues that are material to an investment and that have been raised to their attention when they are making an investment decision. Our Portfolio Management Committees and investment professionals have implementation roles with respect to material ESG issues that have been identified in the investment process.
Working with Portfolio Companies
The events of 2020 made clear that companies must be able to respond to and evolve with the world around them. We strive to be a partner to our companies and support their processes, programs, and policies to enable our shared success. We are able to share relevant best practices and benchmarks as well as provide connections to trusted experts and tested tools to drive progress.
While we have always engaged with portfolio companies on a diverse range of issues, we have also focused on three topics that we believe are critical in our rapidly changing world. These areas are: climate change, diversity and inclusion, and data privacy. We believe that these generate significant risks and opportunities for companies today regardless of sector or geography, and that companies need to engage proactively and productively on these topics.
Learn more about how we drive value within our companies here.
Reporting Our Performance
We believe that setting clear commitments helps drive progress and facilitate transparency, which is one reason why we regularly report our performance. Through relevant key performance indicators (KPIs), we track our performance against goals. Learn more about our KPIs here.
We will continue to thoughtfully approach the ESG opportunities and challenges that we face and look forward to finding new ways to create sustainable value for our partners.
1. Including KKR funds and other client accounts managed by Kohlberg Kravis Roberts & Co. L.P., KKR Credit Advisors (US) LLC, KKR Credit Advisors (Ireland) Unlimited Company, or their affiliates. For the avoidance of doubt, this policy does not apply to KKR’s Capital Markets business or other non-asset management business activities.