KKR International Impression: Reflecting on our progress and classes discovered

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We not too long ago launched our annual International Impression Abstract Report, which opinions key developments in our International Impression technique, launched in 2018 with the intention of investing in scalable enterprise options that search to resolve international challenges. When contemplating the International Impression technique, we thought it might be useful to have a look at macro developments, our funding themes, and classes discovered alongside the best way.

Macro developments: Final 12 months, we famous that COVID served as a reminder of the significance of preparedness and the necessity to construct sustainability, resilience and fairness in societies. In our view, Russia’s unprovoked assault on sovereign neighbors in Ukraine and its fallout this 12 months reinforces a few of these wants, as do the availability chain and labor shortages plaguing many industries. The Russian onslaught has amplified quite a lot of funding developments that we’re watching intently. For instance, European leaders have accelerated their dedication to the power transition; international locations world wide have begun to focus much more on constructing native provide chains for key services; labor shortages for key features have strengthened the necessity to upskill and reskill the worldwide workforce; and cyber vulnerabilities grew to become much more of a priority within the wake of the warfare.

Funding themes: We additionally mirror on current developments associated to our 4 key funding themes: local weather motion, sustainable dwelling, lifelong studying and inclusive development. We now have beforehand famous the resilient nature of our funding themes, pushed by governments, companies and customers.

Regulatory necessities for local weather motion and different ESG priorities accelerated in 2021. In March 2021, the European Sustainable Finance Disclosure Regulation entered into pressure, laying the groundwork for elevated disclosure of buyers on ESG-related knowledge. In the US, the SEC has proposed new local weather disclosure guidelines for public firms and funding practices associated to “ESG funds”. Along with their impact on our personal work, if adopted, these guidelines are more likely to reinforce the significance of firms’ ESG commitments, one other part of the macroeconomic headwinds for our funding themes.

Classes discovered: We now have a deep and longstanding dedication to being an energetic member of the influence investing group. As such, we search to study and share our concepts extra extensively, together with these beneath.

1. Utilizing platforms to extend influence: After we established the International Impression technique in 2018, our thesis was that by investing in confirmed enterprise fashions, we may each create worth and maximize constructive societal influence. One of many methods we have completed this has been by means of considerate mergers and acquisitions and positioning our companies as platforms to assist the size of influence. In the present day, we deal with gaining expertise within the important parts of the operational, cultural and management instruments wanted to efficiently merge present companies.

2. Must advance local weather motion in our firms: Local weather motion is not only an funding theme for us; it’s an crucial in all of our work. For the reason that launch of our International Impression technique, now we have labored to know climate-related dangers and have helped our portfolio firms measure Scope 1 and a couple of greenhouse gasoline emissions, together with growing values ​​of benchmark for the seven firms that had not but measured their emissions. We now have additionally developed materiality-based approaches for our engagement on local weather points.
3. Use management staff incentives to align with ESG influence and administration priorities: As we put money into firms whose core enterprise fashions contribute to the achievement of the SDGs and our administration groups put money into these firms, there’s typically a pure alignment between maximizing constructive societal influence and monetary incentives. in our portfolio actions. To additional align and strengthen our ESG influence and ambitions, this 12 months now we have linked a portion of the short-term administration bonuses of portfolio firms to influence or ESG targets in simply over half of the portfolio firms. with international influence. We intend to broaden this effort in 2023, growing extra compensation pointers for portfolio firm administration by means of collaboration with third events. We consider that these incentives could be a great tool to align and reinforce ESG priorities when completed accurately.
4. The ability of worker engagement: Since 2011, KKR’s pioneering worker share possession program has awarded billions of {dollars} in fairness to greater than 45,000 non-executive staff at greater than 25 portfolio firms. This strategy strives to create worth in firms by mobilizing worker possession and offering fairness participation to staff beneath the C-suite stage, together with hourly employees. In future investments, we intend to deploy this playbook in US-controlled investments and plenty of non-US firms the place potential.

2021 International Impression Abstract

*This 2021 International Impression Abstract Report gives an outline and highlights of our complete 2021 International Impression Report, which is supplied to restricted International Impression companions solely, and consists of all International Impression portfolio firms in March 2022. Impression and ESG knowledge is cumulative since placement as of December 31, 2021, until in any other case said.

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KKR is a number one international funding agency offering different asset administration options in addition to capital markets and insurance coverage options. KKR goals to generate enticing funding returns by following a affected person and disciplined funding strategy, using world-class folks and supporting the expansion of its portfolio firms and communities. KKR sponsors funding funds that put money into personal fairness, credit score and actual property and has strategic companions that handle hedge funds. KKR’s insurance coverage subsidiaries provide pension, life insurance coverage and reinsurance merchandise below the administration of International Atlantic Monetary Group. References to KKR’s investments could embrace the actions of its sponsored funds and insurance coverage subsidiaries. For extra details about KKR & Co. Inc. (NYSE:KKR), please go to KKR’s web site at www.kkr.com and on Twitter @KKR_Co.

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