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KKR ESG & Citizenship Report

Invested in Responsibility

Responsible investment is a way of doing business that we believe makes us smarter, stronger investors.

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. Investing responsibly is smart business and is critical to our ability to manage volatility and unlock value.

HIGHLIGHTS

~255 companies

reviewed during 40 meetings of the ESG diligence group in 2019

10 portfolio companies

received the KKR Eco-Innovation Award or an Eco Grant for their environmentally and financially beneficial innovation projects since the launch of the program1

430+ awards

received by 103 private markets portfolio companies2 for citizenship and ESG-related efforts since 2012

30+ events

participated in or supported in 2019 to advance responsible investment across the industry

77 industry-specific reporting templates

created to guide diligence on financially material ESG issues identified by the Sustainability Accounting Standards Board (SASB) and three cross-portfolio topics

$7.1 billion

invested in companies that help provide solutions to critical environmental or social challenges3

Our Journey

Our responsible investment journey began in 2008 when we began to formalize our efforts to protect and grow value by proactively considering broader stakeholder issues as part of our investment process. Since then, we have strengthened our belief that that 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. We have accomplished this by seeking to mitigate risk in our companies and by adding value to their operations. The importance of our commitment has only continued to grow. The landscape is evolving and our stakeholders are demanding more of us as responsible investment becomes business-as-usual and many ESG issues become more urgent than ever.

What Are ESG Issues?

We seek to identify investment opportunities, reduce risk, and enhance value by addressing ESG issues across the investment life cycle. In this report, when we reference ESG issues, we include regulatory, reputational, and geopolitical considerations. We have both the opportunity and responsibility to be thoughtful about a range of ESG issues that drive where we invest and affect the companies in which we invest.

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Governance and Implementation

Responsible investment is integrated into our Firm’s investment practices and is reflected in our global Responsible Investment Policy, which was formalized in 2020. It articulates our approach to integrating the consideration of ESG risks and value creation opportunities into investment processes across various asset classes globally. To read this policy, visit kkresg.com/esg-policy. This policy replaces the Private Equity ESG Policy, which was codified in 2013.

A cross-functional, global team is dedicated to the management of our responsible investment strategy, implementing it across relevant asset classes, industries, and geographies. This team is knowledgeable about a range of key industry trends and sustainability best practices. The day-to-day work of managing ESG considerations is performed by members of the Global Public Affairs team. However, 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. This structure is depicted below.

Responsibility governance and implementation 2x 2

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.

Importance of Integration

At KKR, ESG issues are managed like other business issues and as part of the existing investment process. 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. Partnership across teams and shared accountability allows for scale and nimbleness.

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. For example, in 2019, we provided trainings to select investment teams in Europe to support their ownership of the ESG management process across the lifecycle of their team’s investments while continuing to collaborate with the Global Public Affairs team.

Progress Through Partnerships

Our one-firm approach4 guides all that we do and ensures that members of various teams are involved throughout our efforts. Working together, team members collaborate with external experts5 to provide resources and tools to our companies when they identify issues or opportunities.

To extend our platform of expertise, and to ensure that we are on the leading edge of emerging issues and expectations, we have established a network of external partners, including non-governmental organizations. These partners help us and our portfolio companies understand and address various ESG issues. We have worked with various partners and organizations since 2008 and a few of them are listed below. Click each organization's logo to visit its website.6

Aha
American investment council logo 1
Bsr
Cap
Ceres logo
Edf
Invest Europe logo
Unpri
30 PC Logo Base edit
Transparency
Uschamber
VOWS logo

Leveraging Frameworks

We are deeply engaged with industry efforts to drive more responsible investing. To help inform our governance framework, we follow relevant industry guidelines for responsible investment.

We have followed the Principles for Responsible Investment (PRI) since 2009, when we became a signatory to this globally recognized voluntary framework. KKR’s PRI Transparency Report is available here. In 2017, we began publicly sharing our responses to the PRI Limited Partners’ Responsible Investment Due Diligence Questionnaire, available at kkresg.com/ddq. We also follow the American Investment Council Guidelines for Responsible Investing, which we helped to develop. We are actively involved with these organizations and continue to use their frameworks to guide our efforts. At the investment level, we are guided by how the Sustainability Accounting Standards Board (SASB) identifies likely financially material issues and we apply this materiality lens across our activities.

2

Includes companies from the private equity, infrastructure, and energy portfolios

3

As of March 31, 2020. Pro forma for Viridor, which was signed in March 2020 and is expected to close in Q2 2020, and GreenCollar, which was signed in April 2020, and is expected to close in Q3 2020. The companies shown above represent all KKR’s SDG solutions-oriented investments in the sub-sectors similar to the Global Impact Verticals as identified by the KKR Global Impact team that were made globally from January 1, 2008 to March 31, 2020 by the KKR private equity, growth equity and infrastructure funds and KKR-managed separately managed accounts, including investments made by other KKR industry teams (as these companies add to our impact knowledge and relationships), and including investments made by the KKR balance sheet. Such determination and assessment involves significant judgment and may differ from another party’s review of the criteria used. Another party’s assessment may include comparable companies not represented above. The specific portfolio companies identified are not representative of all of the securities purchased, sold or recommended for advisory clients, and it should not be assumed that the investment in the companies identified was or will be profitable.

4

See Important Information for additional disclosure regarding KKR’s internal information barrier policies and procedures, which may limit the involvement of personnel in certain investment processes and discussions.

5

Senior Advisors, Industry Advisors, and KKR Advisors are engaged as consultants and are not employees of KKR. See Important Information for more detail.

6

References to external partners on KKR’s website does not imply an endorsement of KKR or its practices. The referenced partners have worked with KKR or its portfolio companies at some point since 2008 and KKR may or may not have a partnership agreement currently in place.