Opportunities abound for Australian businesses and their investors
KKR’s longstanding experience of investing in Australia shows there are abundant opportunities for value creation and growth in the region
KKR is today one of the largest private investors in Australia. How has the investment landscape changed since 2006, when KKR first started investing in Australia?
Australia’s investment landscape has changed significantly since then. The economy has shifted toward services and digitization, particularly over the past ten years, creating new opportunities for both public and private capital to support local businesses redefining legacy industries. The maturity of the capital markets has certainly pivoted the growth and focus to having greater access to private capital, which in turn has allowed companies of all sizes to grow and create sustainable jobs for Australians.
KKR has been proud to work with a broad range of local champions – or leaders in their category – to accelerate growth and take companies to the next level. Since 2006, we have invested over $9bn in Australia and New Zealand across our private equity, real estate, credit, infrastructure, and impact investing funds. We have supported businesses across the consumer and business sectors, including technology-enabled disruptors, and have also been reinvesting to build growth in companies that come from corporate restructurings or so-called 'carve-outs,' such as Colonial First State and The Arnott’s Group.
KKR continues to be extremely active in its investments in Australia – what makes Australia such an attractive market for KKR, and what role does it play for KKR globally?
Australia is an important and exciting part of our global strategy. The country has built a dynamic economy with many outstanding businesses continually reshaping their industries, particularly in healthcare, education, financial services, and tourism.
Australia offers investors an impressive combination of an established and transparent rule of law, a well-educated and diverse population, robust infrastructure planning, and an important-and-necessary open stance toward global commerce. These come together to provide a highly attractive investment environment.
Sustainability has become a global imperative. How important is it for KKR to help businesses to scale sustainably, enhance their positive impact on communities, and improve their ESG performance?
Sustainability as a thematic and ESG performance have been a key part of our investment considerations since 2008. We are constantly focusing on helping our portfolio companies undertake operational changes that bring a sustainable positive impact, investing in innovative solutions that can be used across our portfolio, and advancing transparency through ESG disclosures and industry-wide collaboration. By strategically measuring and managing the environmental impact of business operations, companies will become more efficient, create more productive workplaces, develop stronger relationships with stakeholders, and ultimately build competitive advantages and enhance performance. It is essential.
KKR also has a long history of investing in businesses that promote solutions to broader societal challenges, having invested approximately $10bn globally across companies that offer solutions to some of the world’s most important problems, including workforce development, green energy, responsible waste management, clean water protection, and others. Our impact investing business, launched in 2018, is a derivative of this.
The Arnott’s Group is an iconic, household name in Australia. How has KKR worked with leading brands like them to create sustainable value? Does KKR plan to do more of such investments going forward?
The Arnott’s Group is one of Australia’s most iconic brands, and we have been working closely with the team to power the company into the future by building on its rich portfolio of innovation, sustainability, and giving back to the community with The Arnott’s Foundation.
One of our key initiatives is to help The Arnott’s Group further accelerate their sustainability efforts without ever comprising on quality or taste. The company has now rolled out initiatives to meet Australia’s 2025 National Packaging targets, sustainably grow and source 100% of key ingredients, and focus on achieving net-zero emissions in its operations well ahead of plan. The Arnott’s Group is a brand leader, category leader, and we believe it has a responsibility to be a leader in sustainability. Put another way, we see our collaborative work with The Arnott’s Group team as a good case study of how we can help companies succeed financially and with strong values of corporate sustainability.
KKR has spoken about 'sustainability as a thematic' and 'impact investing' as part of your broader ESG approach. We know that KKR’s US$1.3bn Global Impact Fund has also invested in Australia – can you walk us through the vision behind this and the impact you expect to see in the future?
Our Global Impact Fund is very focused on identifying and investing behind opportunities where financial performance and societal impact are intrinsically aligned. One unique aspect is that our impact strategy identifies and invests in promising companies that measurably contribute to solutions addressing critical global challenges identified by the UN Sustainable Development Goals (UN SDGs).
Our first Australian impact investment was GreenCollar, an important organization focused on the environmental market. GreenCollar helps farmers and other landowners implement projects that generate revenue and reduce greenhouse gas emissions. This is incredibly important in Australia, where agriculture accounts for 55% of our land use. In addition to their work in the carbon market, we are supporting GreenCollar with the development of market-based solutions to tackle other pressing environmental issues, such as water quality, plastics, and biodiversity, and helping them scale and grow domestically and internationally.
We believe KKR can play a significant role in building businesses that contribute to the United Nations SDGs while also generating long-term financial returns for our investors. We believe this approach will help set the new standard across investing, value creation, and measuring success in the space.
This article originally appeared in Australian Private Capital Market Overview: A Preqin and Australian Investment Council Yearbook 2022.