Materiality and Responsible Investment

Identifying and Managing Material Issues

While KKR engages in a broad range of investment activities, we focus our responsible investing efforts in our private equity business and, when applicable, in select non-private equity asset classes. This focus has been informed by our analysis and understanding of the issues most material to our investments – those areas in which we have influence as active managers and owners.

A Materiality-Driven Approach

The focus of KKR’s responsible investment efforts has been informed by an analysis of what is most material to us as investors. Conducted with the development of our first report in 2011, this analysis evaluated the degree of influence that we can exert prior to investment and during ownership in each asset class.

The concept of materiality was first used when determining the asset classes in which we should focus our responsible investment efforts. In this analysis, we assessed each asset class based on the degree of influence that we can exert prior to investment and during ownership. At the time, our analysis indicated that we should focus on the life cycle of our private equity investments.

Since then, as we have broadened our investment platform, we have increasingly expanded our responsible investment efforts, where relevant, in non-private equity asset classes, including real estate, energy and infrastructure, and special situations. Not surprisingly, we have found that the approach and universe of potentially material issues can vary significantly across asset classes and the assets themselves.

KKR’s relative influence over ESG issues across asset classes

Material Driven Approach

Assessing Material Issues

We also apply the concept of materiality when determining which issues to identify and manage in our portfolio. This process is guided by KKR’s Private Equity ESG Policy, which defines material issues as those that “KKR in its sole discretion determines have – or have the potential to have – a direct, substantial impact on an organization’s ability to create, preserve, or erode economic value, as well as environmental and social value for itself and its stakeholders.” As such, our Firm considers a range of ESG issues associated with target companies as potentially material. Sample ESG and reputational issues include:

Environmental

  • Biodiversity
  • Carbon and Greenhouse Gas Emissions
  • Land Use
  • Natural Resource Scarcity
  • Priority Chemicals
  • Water Scarcity

Social

  • Consumer Protection
  • Data Privacy and Cybersecurity
  • Employee Engagement and Labor Relations
  • Health and Safety
  • Human Rights

Governance

  • Anti-fraud and Anti-corruption
  • Board Composition and Independence
  • Ethics and Integrity
  • Regulation and Public Policy
  • Stakeholder Expectations
  • Transparency

Additional Business Risks

  • Country Risk
  • Management Risk
  • Market Issues
  • Reputational Risk
  • Security Risk