(Reuters) -Personal fairness agency KKR & Co Inc is getting ready to launch its first two credit score funds devoted to investing based mostly on environmental, social and company governance (ESG) ideas later this 12 months, in line with an inside memo seen by Reuters.
The funds, supplied to institutional buyers in addition to excessive net-worth people, will probably be managed by KKR’s sustainable credit score group run by Terry Ing and William Needham, in line with the memo.
They’ll search to outperform blended excessive yield and leveraged mortgage index benchmarks by delivering high-single-digit returns on a web foundation, an individual conversant in the matter stated, requesting anonymity as a result of the fundraising particulars are confidential. The focused sized of the 2 funds couldn’t be realized.
KKR declined to remark.
ESG investing, which is gaining in recognition amid a push to deal with challenges corresponding to local weather change and social inequality, is changing into extra outstanding in capital markets.
Some corporations are taking out “inexperienced” or “sustainable” loans and are issuing bonds that include particular ESG commitments. Traders usually reward the businesses with a decrease curiosity expense in the event that they meet associated targets.
The primary fund, KKR Credit score ESG Local weather Alternative Fund, will concentrate on local weather change and make investments globally within the publicly listed debt of corporations that rating extremely on KKR’s “proprietary ESG scorecard,” in line with the memo.
The second fund, KKR Credit score ESG Accelerator Fund, will probably be a world sustainability-focused fund deploying a spread of personal debt investing methods together with direct lending, junior debt, asset-based finance and opportunistic credit score, the memo stated.
The funds will have interaction recurrently with the issuers of the debt they put money into to make sure they’re assembly their ESG commitments, the particular person conversant in the matter stated. The funds will put money into the credit score of oil and fuel corporations so long as they’re dedicated to decreasing their carbon emissions to zero on a web foundation by 2050 or earlier and have credible decarbonization methods, the supply added.
KKR’s international head of public affairs and co-head of its international influence technique Ken Mehlman will work carefully with the brand new funds, whereas the agency’s Sustainable Professional Advisory Council chaired by Bob Eccles will present common steerage and oversight, in line with the memo.
The credit score funds aren’t the primary ESG-dedicated funding product launched by KKR. The New York-based agency launched a $1.3 billion non-public fairness fund in 2019, the KKR International Affect Fund, devoted to investing in corporations that present business options to environmental or social challenges. That fund was valued at 1.7 instances its buyers’ cash on a gross foundation as of the tip of March, in line with a KKR regulatory submitting.
Reporting by Greg Roumeliotis in New York; Enhancing by Edwina Gibbs and Bernadette Baum
