GLOBAL CHALLENGES. GLOBAL SOLUTIONS. 2017 ESG AND CITIZENSHIP REPORT Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 A Note From the Founders 01 THE STATE OF THE FIRM Our Firm and Impact Investing Responsibly How is business OUR Driving Value Through 04 APPROACH ESG Management part of the solution Spurring Sustainable Innovation to today’s global Global Challenges and Opportunities RESULTS 10 WITH IMPACT Achieving Impact Through challenges? Our Portfolio THE KKR Working at KKR 18 EXPERIENCE Since 1976, when KKR first opened Building Stronger Communities our doors, the objectives of the PROGRESS Our Key Performance Indicators 22 AND THE business world have broadened to PATH AHEAD A Word From the Presidents include not only shareholder value ABOUT THIS but also shared value. 25 REPORT At KKR, we have embraced this expanded role. We believe that understanding global issues, forging partnerships to achieve greater impact, and underpinning actions with strong values are essential to not only healthy societies, but also smart businesses. This year’s Environmental, Social, and Governance (ESG) and Citizenship Report describes our commitment to responsible investment. It also highlights examples of ESG-related challenges that affect our portfolio companies and how our portfolio companies in turn impact these challenges. Further, this report The KKR 2017 ESG and Citizenship Report provides examples of their innovative details our activities during the 2017 calendar year. For supplemental information and and adaptive solutions (pp. 10-17). resources, visit kkresg.com. For an explanation of the boundaries and reporting frameworks used in producing this report, see About This Report on page 25. Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 X-ELIO, based in Madrid, Spain, recently installed a 33.4 megawatt solar farm in Fukushima, Japan. Located on the site of a distressed golf course, the installation employs former golf course employees and required no significant deforestation during construction. Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 A NOTE FROM THE FOUNDERS THE STATE OF THE FIRM We have been in the business continued focus on progress. of building companies and This work is also about learn- returning strong investment ing from our past experiences outcomes for our investors and setting the right priorities. for 42 years. As we reflect on Sometimes, it is not possible this legacy, we are extremely to address every issue, so proud, but always strive to do we aim to apply rigorous more. For at KKR, the work of standards to help us focus building strong companies and our efforts to maximize impact better, more secure futures for on a company’s bottom line our clients will never be done. and ESG performance (p. 6). More than four decades of “For continued success, we must be The complexities of today’s investing have taught us that more informed, nimble, and engaged world – a world in which many success lies in people and companies are intersecting than ever. We’ll strive to provide in performance. To success- with multiple issues – have fully grow companies and effective and efficient solutions to intensified our role as respon- create positive outcomes for the challenges our companies and sible investors. The next communities, we must con- communities face.” 42 years will see significant sider multiple stakeholders’ changes to how business is perspectives and a range of factors. Ten years ago, we done, but with those changes and through our expanded recognized the opportunity to develop differentiated role in society, will come incredible opportunities. There investment strategies that protect and grow value. By will be unmatched value, innovation, and progress for proactively considering broader stakeholder issues as those who are bold enough to seek them. part of our investment process, we began our responsi- As a Firm, we will shift and grow with the world ble investment journey (p. 4). around us while standing tall in our values of innova- Since then, we have learned that this work is an art, tion, teamwork, diversity, and integrity. We will hold not a science. It is also a continuous cycle of evaluation true to the belief that dynamic, diverse workforces and evolution without a final destination. We work to will help us unlock value in dynamic, diverse invest- evolve alongside the societies where we invest and ments. We will remain steady and fair in how we support solutions to the critical challenges we share. manage our relationships, keeping our belief that We have found investment opportunities that deliver people choose to work with those whom they “like strong returns by addressing concerns such as food and trust” at the core of how we do business. We will safety, education and learning, and next-generation continue to collaborate with each of you – our valued energy. Additionally, we have identified value-enhancing partners – in order to create meaningful outcomes both opportunities that add to our bottom line by optimizing for our investors and society. environmental, social, and governance (ESG) issues. HENRY R. KRAVIS and GEORGE R. ROBERTS We recognize that, as with company performance Co-Founders, Co-Chairmen, and Co-CEOs broadly, today’s leading ESG management practices will likely be lagging practices in a year without a 1 Downloaded from www.hvst.com by IP address 192.168.160.10kkresg.com | on 2017 09/29/2021 ESG and Citizenship Report OUR FIRM AND IMPACT THE STATE OF THE FIRM Since KKR’s founding in 1976, we have worked to create returns for our clients by following a patient, disciplined shared value for our fund investors, stakeholders, and investment approach and aligning our interests with the companies in which we invest. With deep roots in those of our fund investors. private equity, we have expanded into other alterna- Our approach to responsible investment is no differ- tive asset classes and have a growing presence in the ent. We promote operational excellence and strive to public and capital markets. Today, KKR is a leading make thoughtful management decisions. Transparency, global investment firm managing $168.5 billion of assets engagement, and mutual learning with our partners are across multiple strategies. central to our efforts. THE KKR DIFFERENCE To supplement our own capabilities, we partner with In today’s complex global economy, we believe success leading experts who provide insights on a range of depends on flexibility, the ability to collaborate on oppor- market, societal, geopolitical, public policy, reputa- tunities, and the strength to work collectively through tional, and macroeconomic issues. They also advise challenges. We employ world-class people who function us on environmental, social, and governance (ESG) as a team across asset classes, geographies, and indus- investment matters. try groups. We aim to generate attractive investment ASSETS UNDER MANAGEMENT (AUM) AND KKR BALANCE SHEET1 Book value of the KKR $ balance bn PU 11. 7 bn 2 5 BL sheet 7. IC 9 M $ A S R T K E E K T R S A M $ 7 E 0 T 3 . A Total AUM 9 V Private Equity Credit I b $82.5 bn R n $44.7 bn Energy and P Strategic Stakes4 Infrastructure $26.2 bn $8.7 bn $ Real Estate $6.4 bn 168.5 bn 1 Data as of December 31, 2017. Numbers may not sum to total due to rounding. 2 Book value of $11.7 billion may be reconciled as follows: KKR & Co. L.P. Capital – Common Unitholders of $6.7 billion, plus Noncontrolling Interests held by KKR Holdings L.P. and other of $4.8 billion, plus other adjustments of $0.2 billion. 3 See Important Information on inside back cover for additional information regarding assets under management (AUM). AUM includes $70.9 billion of assets managed by affiliates of Kohlberg Kravis Roberts & Co. L.P. in strategies that do not integrate ESG factors in their investment or portfolio management practices. 4 Strategic stakes AUM represents KKR’s pro rata share of the assets under management or advisement of hedge funds and other investment managers in which KKR holds a minority interest. KKR is not responsible for the management of these managers’ assets. 2 Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/29/2021 OUR PRIVATE EQUITY PORTFOLIO5 101 Companies 43 36 22 637,500 Employees 259,100 251,800 126,600 $120 bn in Revenue $51 bn $57 bn $11 bn n Americas n Asia-Pacific n Europe, the Middle East, and Africa OUR GLOBAL FOOTPRINT6 Investing in People Investing in Economies Investing in Communities RETIREMENT ALIGNMENT WITH PARTNERS PHILANTHROPY AND VOLUNTEERISM $13.3 billion invested or 50 million retirees and committed by KKR, our employees, 54 companies, or 35 percent of our pensioners with exposure to and consultants alongside our fund private markets portfolio, support KKR’s investments investors across our private equity, the communities where they operate growth equity, infrastructure, through formal corporate philanthropy 7 energy, and real estate funds and volunteer programs JOBS RESEARCH AND DEVELOPMENT ESG-RELATED AWARDS More than 695,000 jobs provided by our private equity, $8.1 billion in capital expenditures and technology growth equity, $1.6 billion in research and develop- More than 215 ESG-related infrastructure, and real estate ment by our private equity, technology awards have been presented to growth equity, infrastructure, and real 60 companies in our private portfolio companies estate portfolio companies equity, infrastructure, and energy portfolios since 2012 VETERANS AND DISTRIBUTIONS MILITARY SPOUSES INFRASTRUCTURE $55.3 billion cash back to fund More than 62,500 veterans investors in distributions since and military spouses hired by 2013 across our private equity, $11.3 billion of enterprise value 41 U.S.-based portfolio companies growth equity, infrastructure, in renewable energy and water since 2011 energy, and real estate funds infrastructure assets since 2011 Investing in Solutions $4.6 billion invested behind sustainable solutions-oriented themes since 20088 5 Does not include investments in confidential opportunistic-toehold/public stake investments made on certain private equity funds’ lines of credit.