KKR looks to invest one-third of its impact fund in Asia

The firm completed its fundraising process in February having secured $1.3 billion in commitments for a middle-market strategy involving companies that address the environmental or social challenges set out in the UN sustainable development goals (SDGs). The vehicle is already 25% deployed, with two of the six portfolio companies based in Asia.

KKR’s most recent recruit is Chee-Wei Wong (pictured), head of global impact for Asia. Wong was most recently a managing director at US-based Tailwind Capital where he focused on business services and technology. Before that, he spent nine years with EQT, working on deals in Southeast Asia and Australia out of the Singapore office as well as helping establish the firm’s US mid-market business. Several investments Wong has worked on – in areas such as healthcare, education and technology-driven environmental services – were viewed as a good fit for KKR’s impact remit.

There are 13 people in the impact team globally and Wong is the second in Asia. Last year, Sharon Yang, who previously worked on fundraising for the firm’s private equity, growth equity and real estate strategies in Asia, joined the impact team as a director. There are plans to add more resources in order to pursue the one-third deployment target, according to a source familiar with the situation. People from other parts of the business – from Capstone to capital markets to public policy – will make contributions as required.

There will also be some crossover between the Asia PE and global impact strategies on investments. Last year, both funds participated in the $510 million acquisition of a majority stake in Ramky Enviro Engineers, an India-based waste management solutions provider. The other Asia-based investment, a S$45 million ($32.8 million) commitment to Singapore’s Barghest Building Performance, a specialist in efficient heating and cooling systems for buildings, was a solo effort by the impact team.

Decisions on deal allocation will be made on a case-by-case basis, driven by the needs of the target companies and higher-level portfolio construction requirements. Investments can be as low as $35 million and as high as $120 million, but most are expected to fall in the $50-75 million range. The impact fund’s deal pipeline in Asia is dominated by businesses with enterprise valuations of $200 million and below, so co-investments with the Asian private equity fund are likely to be infrequent.

Investments will focus on several core themes under the SDGs: mitigating climate change, workforce development, sustainable cities and communities, and consumer empowerment. KKR will track performance through financial metrics – the impact fund pursues returns commensurate to those generated by traditional private equity – and impact metrics based on the SDGs. Third-party consultants advise on whether proposed investments meet the necessary criteria before they are put before the investment committee.

Private equity firms have different approaches to impact measurement. TPG Capital’s The Rise Fund created an impact multiple of money, described as an expression of how much outward impact a company has for every $1 put in. An internal organization – subsequently spun out as Y Analytics – was formed to calculate and track this. KKR specifically decided against combining financial and impact considerations into a single metric.

“Asia Pacific’s unique economic and social dynamics – coupled with growing corporate adoption of environmental, social and governance initiatives and meaningful structural reforms – have created a significant opportunity to support companies whose products or services address environmental or social challenges There has never been greater desire and momentum for responsible and solutions-oriented investment in Asia, and we are thrilled to welcome Chee-Wei to the team to lead our Asia Impact efforts to grow our strategy and positive involvement in communities,” said Ming Lu, KKR’s head of Asia Pacific, in a statement.

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