KKR & Co. is planning to raise billions of dollars for its first credit fund focused on sustainable investing, according to people familiar with the matter.

The plans are in their infancy, but are likely to focus on lending to companies that outperform by meeting environmental, social and governance targets, said the people, who aren’t authorized to talk about it and asked not to be identified. The fund will be able to invest across the capital structure, including alternative and leveraged credit, they said. 

A spokesperson for KKR declined to comment about the prospective fund. 

The move comes amid a broader push by the alternative asset manager into ESG investing. KKR, which as of December had around $187 billion dollars of assets under management in credit strategies globally, tripled the headcount of its sustainable investing group and formed an advisory council on sustainability at the end of last year. 

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The firm’s Global Impact Fund, which focuses on equity investments in mid-market companies with ESG at their core, closed in 2020 at $1.3 billion dollars.

Other fund managers including Blackstone Inc. have begun putting ESG considerations at the center of their investment strategies, in part because there’s evidence that they help companies perform better. According to a report released by KKR in April, the asset manager believes a ‘technical shift’ will occur whereby highly-rated ESG credits will be rewarded with tighter spreads in leveraged credit. 

Source: Bloomberg