KKR provides insights into ESG strategy

We comb through KKR’s 2012 ESG report to provide some key takeaways in how the alternative assets titan approaches responsible investment.

This week Kohlberg Kravis Roberts issued its third annual environmental, social and corporate governance (ESG) report, highlighting the many initiatives it embarks on to achieve responsible investment. 

Some of those initiatives include a “Vets @ Work” program, aimed at hiring US military veterans across KKR portfolio companies, which mirrors a similar program adopted by peer asset management firm The Blackstone Group; a first of its kind collaboration with anti-corruption group Transparency International; and a plan to reduce the environmental impact of its New York headquarters (and then later its offices around the world). 

KKR is considered by many an industry pacesetter on ESG, so PE Manager combed through this year’s report, which covers the 2012 calendar year, to highlight a few of the key takeaways: 

• KKR formalized its ESG due diligence efforts by working with third-party experts to develop 18 industry guides that are divided by sector and subsectors, such as healthcare and managed care facilities. “The guides offer key questions and considerations for material ESG factors specific to each industry,” the report said. 

• KKR portfolio companies are shown a series of webinars about responsible sourcing and supply chain management. Also in 2012, a KKR team comprised of “cross-functional experts” was assembled to identify ESG priorities in each of its North America portfolio companies, an initiative the firm plans to complete in Europe by end of year and then later Asia.  

• As mentioned, KKR vowed a “greening” of its New York City headquarters in last year’s ESG report. This year KKR provided an update of the initiative, noting that the firm “eliminated the use of bottled water on select floors, replacing the plastic disposables with a filtration system and providing each employee with a reusable bottle or drinking glass”. KKR estimates the switch will save $20,000 in expenses annually. This year, the firm will focus on its printing and office supply centers, according to the report. 

• Many firms involve their in-house legal and compliance team during due diligence of a portfolio company as a way of assessing governance issues such as anti-corruption, but KKR says these teams continue to monitor portfolio companies post-investment – a notable strategy that may be out of reach for smaller firms with less resources.

• Last year KKR offered its US employees free on-site biometric screenings, and follow-up outreach if their results indicated a health risk. The program complements its internal flu shot and cancer screening outreach initiative. “We are also pursuing changes to our lunch program and office pantries to include more heart-healthy food options,” the firm said.