Investing in SustainabilityAs part of KKR’s “Investing in Sustainability” webinar series, we bring together various voices and experts within KKR and the industry to discuss the market trends related to sustainable investing and what KKR is doing in this space. Watch this five-minute recap to learn how KKR is integrating ESG considerations across its businesses and asset classes. As of April 2022.
We believe we can have the greatest influence through the investment decisions we make. As such, we recognize the importance of managing the resources entrusted to us in a way that creates value for our investors and the world we share. We continue to refine and deepen our approach and Firm resources to create value through our investments.
Sustainable investing2 is a key lever of KKR’s approach to value creation and a way of doing business that we believe helps us make better investments. By assessing and managing ESG, regulatory, and geopolitical issues, we strive to create stronger, better business outcomes while also having a positive effect on the companies in which we invest and our stakeholders.
Our North Star
“Today, more than ever, it is crucial to our ability to deliver on behalf of clients and shareholders for us to consider our responsibility to a wider range of stakeholders in our companies and communities.”
Scott Nuttall and Joseph Bae
Co-Chief Executive Officers
We believe ESG issues are business issues and that integrating ESG factors into the investment life cycle helps us make better investments.
We take a materiality-driven approach and recognize that no two companies3 are the same. Thus, we take a company-specific approach to facilitating our understanding of the relevant risks and opportunities for long-term value creation.
We seek to align our understanding of relevant topics with the Sustainability Accounting Standards Board (SASB) Standards and incorporate these industry-specific standards as a primary input when identifying ESG issues that might be relevant to an investment.
Our approach is constantly evolving. While we are proud of the progress we have made, we believe that our work is far from over and seek to create value as our journey continues.
Advancing Industry Collaboration
In a field that is constantly evolving, we believe that collaboration helps us learn and apply best practices. It allows us to tap into the knowledge of experts who can help us and our portfolio companies understand and address ESG issues and emerging trends. Since 2008, KKR has sought to align with certain leading global frameworks and standards as well as supported and participated in industry groups and cross-sector initiatives. In 2021, we joined the G7 Impact Taskforce and the Sustainable Markets Initiative’s Private Equity Task Force and declared our public support for the TCFD recommendations by officially becoming a TCFD supporter.
Additionally, we joined the Initiative Climat International (iCI), a PRI-endorsed global community of investors who seek to better understand and manage the risks associated with climate change. We participate in the North American chapter of iCI, which was launched in 2022 and is chaired by our Managing Director of Sustainable Investing. We look forward to sharing knowledge, experience, and best practices with fellow members as we jointly develop resources that we believe will help standardize practices on climate risk-mapping, disclosure, and target-setting in private equity.
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 of our Efforts
Through senior-level oversight and global teamwork, we collaborate on an integrated approach and focus on the issues where we have the greatest ability to add value.
KKR’s senior leadership provides ultimate oversight of our ESG-related efforts. Our collaborative culture allows us to connect the dots when it comes to identifying and managing ESG issues, including climate risks and opportunities, in our investment process.
Accountability for this work extends throughout the organization, with global and regional team members collaborating to achieve strong outcomes. Since 2021, our senior executives regularly report on our ESG-related activities to the Audit Committee of the Board of Directors of KKR & Co. Inc., which provides us with valuable governance oversight.
Where applicable, Investment Committees oversee ESG issues that are material to an investment when 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. At the Firm level, KKR also has an active Risk and Operations Committee, which comprises the most senior leaders of each of KKR’s businesses. The Risk and Operations Committee meets monthly and focuses on critical operational issues, including operational oversight, legal and regulatory updates, geopolitical issues and global trends, business operations, strategic initiatives, and other significant topics relating to business operations. Our Global Head of Public Affairs, who is a member of our Risk and Operations Committee, has ultimate responsibility for our global responsible investment strategy.
In 2021, we established an ESG Committee, which comprises senior partners from across the Firm, to act as a single forum to help advance a globally harmonized and proactive ESG agenda. Additionally, KKR’s Sustainability Expert Advisory Council (SEAC), which is made up of independent, third-party experts, shares external insights and perspectives on ESG-related matters for KKR to consider in developing our strategy and practices.
ESG-related Subject Matter Expertise: KKR’s Sustainable Investing Ecosystem
The responsibility for identifying, assessing, and managing ESG-related risks and opportunities lies with the investment teams, who work in partnership with subject matter experts within KKR. With deep connections across multiple teams within KKR, our dedicated Sustainable Investing subject-matter experts represent the core of our ESG domain expertise and are integrated across teams to act as a resource to KKR, our professionals, and our portfolio companies.
In 2021, we tripled our dedicated Sustainable Investing subject-matter experts; our diverse team includes experts across specialties – including ESG integration across asset classes, ESG compliance, impact, and reporting – and geographies, with representation across North America, APAC, and EMEA. But our expertise on ESG topics extends beyond these resources. We believe our one-Firm culture allows us to connect the dots when it comes to thoughtfully identifying and managing ESG issues in our investment process. With resources and experts across sectors and investment platforms, as well as nongovernmental organization partners and technical experts, we believe we have access to a valuable network. For example, KKR Global Institute (KGI), plays a pivotal role in integrating geopolitical issues and global trends, including ESG issues, into our investment process, using policy, market, and macroeconomic analyses.
KKR’s 2021 Sustainability Report
2021 was a significant year of progress for KKR. As our investments grew and diversified, so did our sustainability and equity-focused resources and ambitions.
Since the publication of our first environmental, social, and governance (ESG) report in 2011, we have been committed to sharing our progress transparently and consistently. The scope of this 2021 Sustainability Report represents a significant expansion of previous reports.
1) There can be no assurance that KKR's ESG policies and procedures as described herein will continue, and KKR's ESG policies and procedures could change, even materially. See additional disclaimers and defined terms in the Cautionary Statement to the 2021 Sustainability Report.
2) Sustainable investing as used and defined by KKR herein, which may differ from the technical definition of “sustainable investments” in Art. 2 No. 17 of how it is defined by the European Union’s Sustainable Finance Disclosure Regulation
3) In this section, the term "company" or "companies" also refers to assets, operators, issuers, and, where relevant, sponsors. The actual investment process used for any or all KKR's investments may differ materially from the process described herein. Actual results may differ materially from any forward-looking statements.