KKR Global Public Affairs

Kenneth B. Mehlman
July 17, 2012

CONFIDENTIAL

Global Bull Market for Politics, Volatility, Uncertainty

Sovereign debt
Fiscal compact
Slow growth
Populism
Demographic decline

2012 election
Sovereign debt
Economic anxiety
Populism
Demographic challenge

Leadership change
Increasing public concern
Ability to maintain growth?
Coming demographic cliff

Decline of Mukhabarat states

Impact of rising Iran
Demographic bulge

Globally: Increasing use of tech and social media

creates heightened scrutiny and 24/7 news cycle
2

Former Brazil Central Bank

Head to Join KKR

KKRs Shares Rally 7%

After Partial Selldown of
Alliance Boots

KKR Agrees to Buy

Prisma Capital

KKR Raises $4B for Deals in

Infrastructure, Energy
3

Increased Media Scrutiny on Private Equity

Over 145,000 articles globally
on Private Equity since Jan 1

11% mention Romney

10% are from outside of US

April

March

February

January

13791

18278

16628

18563

All PE Articles

Source: Various News Outlets; Media research from Factiva, 6/30/12.

341

428

693

2910

Mentions of Romney

Overview of Global Public Affairs

We help to enhance and protect

KKRs value through:

Managing Reputation

Addressing Existing &

Emerging Issues

Corporate marketing & branding

External communications
KKR employee communications
Media relations
Executive positioning
Thought leadership

Public policy
Stakeholder engagement
Environmental, social, governance
(ESG) management
Due diligence process
Portfolio company counsel

New York

London

Washington D.C.

Singapore

Why This is Critical Today

New scrutiny

KKRs Global Public Affairs Strategy

1. Define the KKR brand according to what we know,

who we are, and what we build (not how we invest)
2. Maintain clear and consistent messaging across all
of our businesses
3. Explain KKR in key markets, key business units, and
deep expertise and human capital
4. Identify and capture shared value benefits of our
investment model
5. Foster strong internal communication and
communication with portfolio companies

KKR Brand: The Power of Partnership

Power of Partnership
Authentic to KKRs one-firm culture
Based on partnership blueprint between Henry & George
Highlights ability to get things done across markets, asset
classes, and geographies
Resonates globally and across businesses lines and with key
audiences

Avoids overpromise

Partnership Applies to All Audiences

Audience

Proof Points

LPs

$6 billion + invested in KKR investments;

Continuing importance of carry

KKR employees

One firm with shared ownership and shared

values

Portfolio companies

Build stronger businesses, based on

collaboration, trust and joint expertise

Stakeholders

Identify shared value approaches that generate

positive outcomes for all stakeholders, including
ESG issues

Public investors

Shared and broad based ownership of stock and

one-firm approach to growth and diversification

Public Affairs Key Activities

Communications &
Corporate Marketing
Differentiate to build
the KKR brand
Manage key defining moments,
announcements, and issues by
building a story and an echo
chamber around all
Establish meta narrative that
explains how we see the world
and invest behind it, useful to all
businesses
Proactively tell KKR story to
reinforce differentiators
Improve internal communication
Position KKR and senior
management as thought leaders
Support partnership with all
constituents through
communication:

LPs and clients

Portfolio companies
Business partners
Employees
Media
Regulators/govts

Support efforts to protect PE

industry reputation
Show depth of KKR bench,
implicitly addressing succession
question

10

Regulatory & Legislative

Protect and enhance
KKRs license to operate

US: Tax policy, Financial Regulatory

Reform, Romney risk
EU: AIFM, compensation rules,
financial transaction tax, tax reform
More proactive and coordinated
approach to global tax issues in nonUS markets
Maintain policy alliances that enhance
KKR license to operate
Assist industry-wide issues and protect
KKRs unique needs through leadership
(PEGCC, EPER, EVCA, BVCA)
Pension reform
More efficient updates for MC, Risk
Committee others via Policy Radar
screen
Build effective and efficient PA
capability in Portfolio Companies
where necessary

Value-add to Investment
Process
Support and drive KKR
commercial results
Gain fundraising advantage:

Key investors are familiar with and

trust stakeholder/ESG efforts
Expand ESG SMAs
Use 2012 geopolitical knowledge to
enhance LP relationships

Enhance investment process:

Identify, address & manage relevant

regulatory/stakeholder/ESG issues
proactively and systematically in all
businesses
Deal flow is enhanced due to success
with stakeholder engagement

Strengthen PCs management of

material issues:

PC execs proactively engage PA team

expertise on critical issues
Key issues are systematically tracked
through PC dashboard
Relationships with best in class
advisors / NGOs enhance and validate
performance
Communities of practice provide
proven resources around key issues

Why We Care about ESG

Changing public expectations,
regulation & marketing forces
Globalization
Financial crisis hangover
Resource scarcity
Information technology
Demographic change

United Nations Principles for Responsible

Investment (UNPRI)
Over 1000 investment institutions with collective
assets under management of ~USD 30 trillion
The signatories have committed:
To integrate consideration of environmental, social
and governance issues into investment decisionmaking and ownership practices, and thereby
improve long-term returns.
www.unpri.org

11

Sustainability issues
will be critical to the
future success of our
business

93% of CEOs believe that

sustainability issues will be
critical to the future success of
their business*
* According to A New Era of Sustainability: UN Global
Compact-Accenture CEO Study 2010.

Our Strategy: Integrating ESG into the Investment Process

ESG risks and opportunities
assessed and addressed through
Public Affairs, IC, PMC

THROUGHOUT
INVESTMENT

PREINVESTMENT

Setting
expectations
and partnering
with portfolio
companies

Identifying
potential risks
and
opportunities

12

Identify Risks and

Opportunities Through:
Investment Committee process
(questions in IC deck
guidance)
Proactive outreach to public
affairs or legal/compliance
team

Proactive Programs Around:

Environment/sustainability
Responsible sourcing
Anti-corruption
Labor/employee engagement
Transparency
Wellness
Worker safety

Exit

Our Approach to ESG Management

Program

Our Involvement

Responsible
Sourcing Initiative

24 portfolio companies
receive customize sourcing
reports
50% of KKR PE portfolio has
received training

Social benefits:
Improved oversight and
management of human
rights issues in supply
chains

Business benefits:
Reduced reputation risk
Enhanced supply chain
relationships & reduce possible
supply chain disruptions

23 portfolio companies:
Spanning North America,
EMEA, Asia
Across a variety of industries

Environmental benefits (at

13 PCs):
810,000 metric tons of
greenhouse gas emissions
2.2 million tons of waste
300 million liters of water

Business benefits:
$365 million estimated
cumulative cost savings and
additional revenue at 13
companies

portfolio companies:
Nielsen
Biomet
First Data Sealy
Visant
HCA

Social benefits:
Over 150,000 employees to
benefit
Improved employee
wellness and engagement

Business benefits:
Improved employee
productivity & sick days
Reduced health care costs

portfolio companies:
Accellent
HCA
Del Monte
Nielsen
Dollar General Toys R Us
First Data
US Foods

Social benefits:
High-quality jobs for US
military veterans

Business benefits:
Proven, highly skilled work
force

Social benefits:
Reduced corruption
Better understanding of all
local stakeholders impacted
by investments

Business benefits:
Protect our investments from a
reputational & business
perspective
Focus on compliance with FCPA,
UK anti-bribery code

KKR Workplace
Wellness Program

Vets@Work

In 2011, formed formal

partnership with Transparency
International to support our
entire global PE portfolio

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Shared Value Benefits

How You Can Help

1

Flag potential issues early and raise to the Global Public Affairs team
- Key announcements

- Issues at companies

- Possible investments

- Investor concerns

Document any due diligence of environmental, social, or governance issues

Encourage portfolio companies to communicate priority issues at the board level

Support portfolio companies efforts in Green Portfolio, Responsible Sourcing, and

other programs and hold them accountable for results

Flag risks and opportunities around regulation and public policy

Let us support you on public engagements

Sample issues:
Environmental
Land use
Carbon and greenhouse gas
emissions
Biodiversity
Natural resource scarcity
Priority chemicals
Water scarcity

14

Social
Employee relations and labor
engagement
Organized labor or unions
Health and safety
Consumer protection
Data privacy
Human rights
Diversity and human capital

Governance
Regulation
Anti-fraud and anti-corruption
Ethics and integrity
Stakeholder expectations
Transparency