ImpactAlpha, Jul. 12 – The $471 billion asset manager reported the first close in an S.E.C. filing. Fundraising for the follow-on impact fund already has exceeded the $1.3 billion KKR raised for its first global impact fund in 2020.
“What’s different this time is there’s proof points,” KKR’s Ken Mehlman said at a Morgan Stanley event last month. Mehlman said KKR’s first impact fund, which has made 15 investments, has recorded a gross internal rate of return of more than 50%.
The new fund will employ the same thematic strategies across climate action, sustainable living, lifelong learning and inclusive growth. “We’re having very good conversations and we’re excited about the opportunity to continue to build this platform,” Mehlman said.
The current market correction makes it “a good time to be putting capital to work,” Mehlman said, “if you’ve got dry power, which we do.” Impact investments with “structural tailwinds” may outperform in a downturn, he added. For example, cities and counties that don’t meet water-quality standards because of stormwater runoff, he said, have to upgrade “regardless of where the market is.”
KKR earlier this year invested in Texas-based Resource Environmental Solutions for its stormwater management and restoration solutions for wildlife habitat, wetlands and streams. “In some ways, when the market goes down, there’s an increased imperative to train those workers or upgrade those workers,” Mehlman said. “When the market goes down, and there is fiscal stimulus by governments, a lot of times it focuses on things like, ‘How do we make our infrastructure more resilient?’”
Private equity giants continue to raise big impact funds.
BlackRock in May said it had raised $800 million for its Impact Opportunities fund to invest in companies led by or serving people of color. TPG Rise closed its climate fund at $7.3 billion in April. Apollo is raising a $1 billion impact fund.
Like Apollo, KKR has created a sustainability expert advisory council. KKR’s panel includes SASB’s Robert Eccles, Ford Foundation’s Roy Swan and Andrew Stern, former president of the Service Employees International Union. KKR is also said to be readying two sustainability-focused credit funds. A spokesperson for KKR declined to comment on the firm’s fundraising efforts.