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.
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.
Our Global Ambitions
Since formalizing our approach to ESG management in 2008, we have focused on supporting our companies’ efforts on their business-relevant topics. We have also recognized that companies across sectors generally have responsibilities when it comes to managing a core set of issues, including human capital, climate, and data responsibility. Last year, building on this decade of learnings, we developed a set of Global Ambitions with the goal of inspiring strong performance across the four focus areas shown below.
"KKR's Global Ambitions build on over a decade of lessons learned from our work with portfolio companies and reflect our systematic approach to managing ESG risks and opportunities for long-term value creation."Ken Mehlman | Global Head of Public Affairs and Co-Head KKR Global Impact
OUR AMBITION IS THAT, WITH KKR’S SUPPORT, MAJORITY-OWNED COMPANIES IN OUR PORTFOLIO WILL ALIGN WITH THESE OVERARCHING AMBITIONS GOING FORWARD:
Driving Value Creation
When we are invested in a company, we leverage our investment model and our focus on operational and strategic improvements to drive value creation on ESG issues across our investments, where relevant. In line with our Global Ambitions, we believe there are three topics that are critical for all our portfolio companies, regardless of sector or geography:
- Human capital
- Data responsibility
In addition to these topics, each portfolio company may also address ESG topics that are relevant to it based on its industry, where it operates, and its stakeholders, often collaborating with KKR.
Scaling Up: 2021 Highlights
Created tools and resources for our portfolio companies, including an updated Diversity, Equity, and Inclusion (DEI) Handbook
Set net-zero by 2050 goals at three private markets funds that are currently being raised
4th Cyber Risk Review performed with 80+ portfolio companies participating
ESG Integration Across Asset Classes
We take a materiality-driven approach and recognize that no two companies4 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. Our Responsible Investment Policy articulates our approach to integrating the consideration of ESG risks and potential value-creation opportunities into investment processes globally and across various asset classes. In line with this policy, we have also developed business-specific ESG management strategies and guidance to reflect asset-specific nuances and considerations, such as KKR’s varying levels of influence and control of target companies, operators, issuers, and sponsors.
Scaling Up: 2021 Highlights
Developed KKR’s ESG Scorecard to assess the ESG characteristics of our Credit portfolios and scored 1,100+ positions5 on our Credit platform
Expanded GHG emissions reporting to Asia Pacific Infrastructure strategy and planning to conduct GHG footprints across the entire Infrastructure portfolio in 2022
45,000+ non-management employees across more than 25 portfolio companies awarded billions of dollars in equity through KKR’s employee ownership program since 2011
Focused on defining and strengthening our framework across our global Real Estate platform, including the development of a Global ESG Acquisition Checklist
Our Investment Process5
We strive to integrate ESG considerations into our decision-making and management practices by identifying and managing the ESG issues that we believe are most relevant to our investments. We do this to support companies’ growth and reduce their risks across the investment life cycle. KKR’s influence and control can vary significantly across asset classes, which is taken into account during the ESG management process. Explore this process in the interactive infographic below.
KKR Global Impact Strategy8
Launched in 2018, the KKR Global Impact strategy (“Global Impact”) seeks to help investors achieve meaningful financial outcomes by helping to solve unprecedented societal challenges. We identify promising companies that we believe measurably contribute to solutions that address critical global challenges as identified by the UN Sustainable Development Goals (SDGs).
Scaling Up: 2021 Highlights9
- Investments in 9 countries, with 3 new investments in 2021
- Board members who are diverse10 added to company boards of directors since the Fund’s inception
- Sustainable Development Goals addressed
- Dedicated team members across North America, Europe, and Asia, 60% of whom are diverse
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 in the Cautionary Statement.
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 report, we are not using such terms “material” or “materiality” as they are used under the securities or other laws of the U.S. or any other jurisdiction, or as they are used in the context of financial statements and financial reporting. Materiality, for the purposes of this document should not, therefore, be read as equating to any use of the word in other KKR reporting or filings.
4 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.
5 As of May 2022.
6 The businesses in scope for our Responsible Investment Policy include Credit (Public, Private, and Special Situations), Energy Real Assets, Infrastructure, Core, Private Equity, and Real Estate (Equity and Credit). Refer to Cautionary Statement for important disclosures regarding KKR's ESG-related initiatives, policies, and procedures.
7 The “Gating Issues” list is periodically updated to include activities, operations, or industries that raise critical ESG or reputational risks. If a potential investment is directly or indirectly involved in such activities, our investment teams will work with the Global Public Affairs team to evaluate the best path forward, which may include declining to invest based on the implications for business value over time.
8 The above is for information purposes only. It shall not constitute an offer to sell or the solicitation of any offer to buy Interests.
9 Data as of March 2022, with the exception of the number of diverse board members, which is as of December 31, 2021, in line with our impact reporting period.
10 Individuals self-identifying as female, LGBTQ, or as from a historically underrepresented group. For more detail on assumptions and calculation methodologies, refer to the Important Information of this report.