KKR to Introduce Its First Two ESG Credit Funds
Private equity company KKR & Co Inc plans to launch its first two credit funds dedicated to investing based on environmental, social, and corporate governance (ESG) principles later this year.
The funds will be managed by KKR's sustainable credit team led by Terry Ing and William Needham and offered to institutional and high-net-worth investors.
They will strive to surpass blended high yield and leveraged loan index benchmarks by producing net returns in the high single digits, according to a source who requested anonymity due to the sensitive nature of the financing information.
Capital markets are growing more reliant on ESG investing, which is gaining popularity amidst efforts to solve concerns such as climate change and social inequality.
Some companies are taking out "green" or "sustainable" loans and are issuing bonds that come with specific ESG commitments. Investors often reward companies with a lower interest expense if they meet related targets.
The first fund, KKR Credit ESG Climate Opportunity Fund, will concentrate on climate change and invest globally in the publicly listed debt of companies with high scores on KKR's "proprietary ESG scorecard."
The second fund, KKR Credit ESG Accelerator Fund, will be a global sustainability-focused fund employing a variety of private debt investing techniques, including direct lending, junior loans, asset-based finance, and opportunistic credit.
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The funds will communicate routinely with the issuers of the debt in which they invest to guarantee compliance with their ESG commitments, according to a source with knowledge of the matter. The funds will invest in the credit of oil and gas firms that are dedicated to achieving net-zero carbon emissions by 2050 or earlier and have credible decarbonisation programmes.
Ken Mehlman, KKR's global head of public affairs and co-head of its global impact strategy, will engage closely with the new funds, while the firm's Sustainable Expert Advisory Council, led by Bob Eccles, will provide guidance and oversight regularly.
The credit funds are not the first ESG-focused investment products that KKR has introduced. In 2019, the New York-based company announced the KKR Global Impact Fund, a $1.3 billion private equity fund dedicated to investing in firms that bring commercial solutions to environmental or social concerns. According to a KKR regulatory filing, this fund was valued at 1.7 times its investors' money on a gross basis as of the end of March.