KKR & CO. INC.

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KKR : PRI Limited Partners' Responsible Investment Due Diligence Questionnaire (DDQ)

06/23/2022 | 05:45am EDT

Important Information

The following information has been provided by Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, "KKR" or the "Firm") at your request. This information is being provided on a confidential basis for discussion and informational purposes only and is not an offer to sell or a solicitation to purchase any securities of any investment fund or vehicle sponsored by KKR. There is no representation or guarantee regarding the reliability, accuracy or completeness of the information contained in this document, and KKR will not be liable for any damages, including loss of profits, which may result from reliance on this information. KKR is not under any obligation to update or keep current the information contained in this document. Nothing set forth in below is or shall be deemed to be investment advice or the offer of investment advice to any recipient thereof.

Each Recipient agrees to treat the information contained herein in a confidential manner. Such information may not be reproduced or used in whole or in part for any purpose other than consideration of an investment in the Interests, nor may it be disclosed without the prior written consent of KKR to anyone other than representatives of Recipient directly concerned with the decision regarding such investment who have agreed to abide by the foregoing restrictions. Each Recipient, by accepting this Questionnaire, thereby agrees to return it promptly upon request.

References to "KKR Capstone" or "Capstone" are to all or any of KKR Capstone Americas LLC, KKR Capstone EMEA LLP, KKR Capstone EMEA (International) LLP, KKR Capstone Asia Limited, and their affiliates, each of which are owned and controlled by their senior management. KKR Capstone is not a subsidiary or affiliate of KKR. KKR Capstone operates under several consulting agreements with KKR and uses the "KKR" name under license from KKR. References to operating executives, operating experts, or operating consultants are to employees of KKR Capstone and not to employees of KKR. In this presentation, the impact of initiatives in which KKR Capstone has been involved is based on KKR Capstone's internal analysis and information provided by the applicable portfolio entity. Impacts of such initiatives are estimates that have not been verified by a third party and are not based on any established standards or protocols. They may also reflect the influence of external factors, such as macroeconomic or industry trends, that are unrelated to the initiative presented.

References to "Senior Advisors" and "Industry Advisors" are to individuals who are engaged, as consultants, to assist KKR with sourcing or developing investment ideas and a variety of other matters. These individuals are not employees of KKR. The portion of the compensation paid to Senior Advisors and Industry Advisers that is related to fund activities, such as sourcing investments or monitoring portfolio companies, may be borne by the relevant funds. References to "KKR Advisors" are to individuals who were formerly employees of KKR and are engaged as consultants for KKR. None of the compensation of KKR Advisors is borne by the funds.

The reported impact of initiatives provided in this report is based on internal analysis of KKR and/or KKR Capstone and information provided by the applicable portfolio company. Impacts of such initiatives are estimates that have not been verified by a third party and are not necessarily reported according to established voluntary standards or protocols. KKR does not guarantee the accuracy, adequacy, or completeness of such information. They may also reflect the influence of external factors such as macroeconomic or industry trends. There is no guarantee that results shown will be replicated in the future and actual results may be better or worse in future years.

Unless otherwise indicated, statements in this Questionnaire are made as of December 31, 2018. The delivery of this Questionnaire at any time shall under any circumstances create an implication that the information contained herein is correct as of any time subsequent to such dates.

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LIMITED PARTNERS' RESPONSIBLE INVESTMENT DUE

DILIGENCE QUESTIONNAIRE

*Please Note: The following information is an excerpt of information shared with KKR's fund investors.

1. WHAT ARE YOUR ESG-RELATED POLICIES AND HOW DO ESG FACTORS INFLUENCE YOUR INVESTMENT BELIEFS?

  1. Do you have a policy that describes your approach to identifying and managing ESG factors within the investment and portfolio management processes? If so, please provide a copy. If not, please indicate whether you would consider adopting a responsible investment policy.
    KKR has been publicly committed to responsible investment since Kohlberg Kravis Roberts & Co L.P. became a signatory of the UN-supported Principles for Responsible Investment ("PRI"). Our commitment is publicly available at www.kkr.comand www.kkresg.com. In 2013, KKR codified our processes and procedures related to responsible investment by developing a global Private Equity ESG Policy, which was published publicly in 2014. The policy applies to KKR's private equity investments going forward and establishes the various roles and responsibilities of KKR executives. Additionally, the policy details KKR's goals for ESG-related performance, referring to existing responsible investment frameworks for guidance. We will continue to make enhancements to the policy, as necessary.
    View KKR's Private Equity ESG Policy here.
  2. What is the current implementation status of your responsible investment policy? Do you have any firm plans to develop your approach towards the management of ESG factors?
    We have been publicly committed to being a responsible investor since becoming a signatory of the PRI in 2009 and are always seeking to make continuous improvements to our approach. In particular, we are focused on finding meaningful ways to create sustainable value in our private markets investments. In 2010, we identified key performance indicators ("KPIs") against which we have evaluated our performance to date. In KKR's 2018 ESG, Impact, and Citizenship Report, please refer to pages 41-43 for a table of KPIs and the various ways in which we have made progress against our goals. The table is organized according to relevant PRI principles.
    Responsible investment through the thoughtful consideration of ESG-related issues is a way of doing business that we believe makes us smarter, better investors. We leverage our investment model and our focus on operational improvements to drive value creation on ESG-related issues across our private markets investments.
  3. Do you commit to any international standards, industry (association) guidelines, reporting frameworks, or initiatives that promote responsible investment practices?
    In addition to being guided by KKR's values, we endorse relevant industry guidelines for responsible investing. In 2009, Kohlberg Kravis Roberts & Co. L.P. signed the PRI. Where consistent with our fiduciary responsibilities, we seek to follow the PRI's six principles for our private markets investments. Also in 2009, as a member of the American Investment Council ("AIC") (formerly the Private Equity Growth Capital

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Council), KKR worked with other AIC members to develop the Guidelines for Responsible Investing for the private equity industry.

In 2018, we participated in a variety of industry events and groups, including:

Speaking Events

  • Panel during the Women in Financial Services Forum. (March 2018)
  • Panel, "Innovation in Private Equity: A Modified Platform for Generating Impact Returns," during the Skytop Strategies Impact Investing Event.
  • Two panels during the Private Equity International Responsible Investment Forum Europe. (June 2018)
  • Fireside chat at the Impact Capitalism Summit in Nantucket. (July 2018)
  • Panel on Driving Value through ESG Reporting, hosted by the American Institute of Certified Public Accountants and the Sustainability Accounting Standards Board. (October 2018)
  • Remarks to the Women in Sustainable Investing (WISE) Washington, D.C. chapter. (November 2018)
  • Panel discussion, "Private Equity Investments in Impact Investing," during the Columbia University Social Enterprise Conference. (November 2018)

Sponsorships

  • 2018 Investor Summit on Climate Risk. (January 2018)
  • PEI: Responsible Investment Forum 2018.
  • Impact Capitalism Summit in Nantucket. (July 2018)
  • Sustainability Accounting Standards Board Symposium 2018. (December 2018)

Internal and KKR Portfolio Events and Speaking Engagements

  • In 2018, in addition to the above speaking appearances, KKR attended the Ceres Investor Summit, BSR Conference, GRI's The Investor Perspective on the Future of ESG Reporting, PEI: Responsible Investment Forum, The 6th Annual Responsible Business Summit New York, Ceres Conference, Columbia Business School Climate Science & Investment Conference, US SIF Annual Conference - Investing for a Sustainable World, CleanTechIQ's ESG Integration in Fixed Income Forum, PRI in Person, PRI Infrastructure Forum, and JPMorgan Chase & Co.'s Disrupting Climate Change: Financing the Energy Transition event during Climate Week.
  • Responsible investment and impact investing topics were included during the KKR Americas Investors' Meeting. (June 2018)
  • In October 2018, KKR proudly co-hosted the 2018 Veterans Initiative Summit in Washington, D.C. with Apollo, Blackstone, and Carlyle. This three-day summit focused on creating an environment for attendees to meet and discuss opportunities for their companies to engage around military issues on-site and beyond. The content centered on how private equity portfolio companies can attract, retain, and promote veterans and military spouses to improve business operations and support communities. The agenda included plenary and breakout sessions, a military hiring fair, a hands-on service project, and more.
  • A member of the KKR Vets @ Work program team presented to KKR portfolio companies' Chief Human Resources Officers (CHRO) during the annual KKR CHRO Conference to share the value of incorporating talent from the military community into their companies.
  • KKR held its annual General Counsel (GC) Conference for its portfolio company GCs and both KKR's Director, Sustainable Investing and Head of Global Public Affairs spoke during the event.

Other

  • KKR participated in quarterly meetings with responsible investment professionals from peer private equity firms.
  • KKR participated in a Private Consultation on Corporate Sustainability Benchmarks with the World Benchmarking Alliance. (April 2018)

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  • KKR's Director, Sustainable Investing actively engaged with the SASB Standards Board as a member of the Board.
  • KKR's Director, Sustainable Investing became a member of the PRI's Reporting and Assessment Advisory Committee.

1.4 Do you make formal commitments relating to ESG integration in fund formation contracts, Limited Partnership Agreements, or in side letters when requested by investors?

KKR seeks to accommodate the specific needs of our clients, and as such, in the past has entered into side letters that have been provided to, and are negotiated with, limited partners to address specific concerns that they may have.

2. HOW DO YOU IDENTIFY AND MANAGE MATERIAL ESG-RELATED RISKS AND USE ESG FACTORS TO CREATE VALUE?

  1. How do you define the materiality of ESG factors? Please give 2-3 examples of ESG factors that you have identified as material to portfolio companies in your most recent fund.
    For the purposes of KKR's private equity ESG policy, "material" ESG issues are defined as those issues that KKR in its sole discretion determines have-or have the potential to have-a direct, substantial impact on an organization's ability to create, preserve, or erode economic value, as well as environmental and social value for itself and its stakeholders. These issues are taken into the context of the industry sector, the countries in which the business operates, and the type of investment, e.g., control, minority, or public equity.
    Furthermore, in 2017, KKR began using the standards of the Sustainability Accounting Standards Board's standards to inform the assessment of material issues at portfolio companies. Examples of issues considered include data privacy, labor relations, and responsible lending.
    To provide a short case study, KKR's private equity investment team identified an opportunity when Unilever was looking to sell Upfield, its plant-based spreads business, which includes cooking and baking products. During the diligence phase, the private equity investment team, in partnership with the Global Public Affairs team, identified that supply chain management, particularly the management of palm oil, was a material issue. Read the Upfield ESG management process case study, available at www.kkresg.com, for more information.
  2. Describe your process for identifying and understanding (i) potentially material ESG risks, and (ii) ESG-related opportunities during due diligence.
    All potential investments at KKR go through a rigorous due diligence process. An integral part of this due diligence can be the evaluation of potential deals from an ESG management perspective, which includes both risks and opportunities.
    During diligence, a team of cross-functional internal subject matter experts assesses prospective investments to identify key ESG factors and gathers the appropriate information about the company under review. Our ESG diligence group also reviews relevant considerations based on a company's geography and industry. Extensive evaluation of ESG risks and opportunities, coupled with on-site due diligence visits and the support of external advisors where necessary, enables us to target areas of engagement and determine priority initiatives.
    Issues for assessment could include:

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Disclaimer

KKR & Co. Inc. published this content on 21 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 June 2022 09:44:02 UTC.


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Net income 2022 2 716 M - -
Net Debt 2022 3 304 M - -
P/E ratio 2022 13,1x
Yield 2022 1,33%
Capitalization 27 693 M 27 693 M -
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Nbr of Employees 3 238
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Joseph Yong Bum Bae Co-Chief Executive Officer & Director
Scott Charles Nuttall Co-Chief Executive Officer & Director
Robert H. Lewin Treasurer & Head-Corporate Development
Henry R. Kravis Executive Co-Chairman
George Rosenberg Roberts Executive Co-Chairman
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