Kline Hill’s COO on ESG; KKR warns one risk to its business is that people don’t like it

Video interview with Kline Hill: With the Securities and Exchange Commission signaling it’s looking closer at ESG investment policies, it’s a good idea to walk the ESG walk if you talk the ESG talk. While the corporate finance division has, in the past, said its primary concern is the adequate disclosure about the environmental risks posed to businesses, the enforcement inspections and examination division early this year said it has a special interest in how investment advisors disclose ESG strategies.

One CFO recently told me he expects it to be only a matter of time before a private fund runs afoul of regulators; though it’s probably likely they’ll focus on major conflicts or policies that largely don’t reflect reality, in my view. And, as Louis Sciarretta, COO of secondaries investor Kline Hill Partners, says in an upcoming video interview: “The SEC is focused on this, so you need to do what you say and say what you do.” Even if you’re a minority investor like Kline Hill. Sciarretta has some interesting stuff to say about succession planning, LP data demands and more in the interview, so stay tuned for that.

Speaking of disclosure: While Blackstone earlier this week noted in a regulatory filing that coronavirus posed a risk to its funds, KKR noted in its own regulatory filing that one big risk to its business is that people don’t like it.

Well, at least you’re not a bank! Oh… uhhh.

More specifically, public sentiment is increasingly against “globalization, free trade, capitalism and financial institutions,” says KKR.

That’s pretty much a problem for most business, not just PE. But “public discourse and Congressional inquiries in the 2020 US presidential election have elevated the level of focus put on us, our industry and companies in which our funds are invested.”

Industry bigwig Carl Thoma warned recently that the anti-PE rhetoric is “probably going to get worse.” He also urged the industry not just to turn to their lobbying organizations and PR firms, and start going out to make the case for the industry themselves.

Email prepared by Graham Bippart