Introduction

The  purpose  of  this  Responsible Investment (“RI”) policy  is  to  define  KSL’s  approach  to  integrating  environmental,   social   and   governance   (“ESG”)   risks   and   opportunities into investments made through its private equity funds.  We are committed to exhibiting leadership in corporate citizenship throughout our business operations. Throughout our history of investing exclusively in travel and leisure businesses, we have considered ESG issues that may affect our prospective investments and the surrounding communities.  We believe that effective management of ESG issues is critical to preserving and creating long-term value for investors, operators, employees, guests and communities.  We continually seek opportunities to improve our ESG approach and policies.

Responsible Investment Policy

We will consider and manage material ESG risks, opportunities and impacts within our firm and throughout the diligence, stewardship and exit of our investments.  We strive to operate in accordance with industry standards such as the United Nations Principles for Responsible Investment and American Investment Council Guidelines for Responsible Investment while complying with all applicable laws and regulations. This  policy  will  apply  to  all  private  equity  investments  made by KSL following the date hereof, and it will be interpreted in accordance with local  laws  and  regulations.  In accordance with our fiduciary duties to our clients, this investment policy provides that we:

  • Maintain the highest standards of ethical conduct to ensure excellence in KSL’s daily operations.
  • This includes ensuring that all employees receive this policy and related ESG information, providing opportunities for employees to engage in ESG training and education, and encouraging all employees to be good citizens in their communities by supporting their charitable efforts.
  • Identify material ESG issues using internal and external resources throughout the due diligence process to avoid or mitigate substantial risk, as well as to capitalize on opportunities that also further our ESG goals.
  • Work with our portfolio companies during our ownership period to identify and support improvements in ESG issues during the life of our investments and beyond.
  • Maintain and enhance resources to support our ESG commitments. This includes developing internal resources and collaborating with leaders in sustainable business and investment.
  • Encourage dialogue with our limited partners and other stakeholders regarding how we can better address ESG issues in accordance with their core values and investment initiatives.
  • Promote transparency and accountability. Include ESG matters at least annually in quarterly reports to limited partners.

RI Governance and Management and Training

In order to support the implementation of this RI policy, we will develop internal resources that will enhance the efficacy and overall incorporation of ESG issues into our investments and business practices. We seek to foster a corporate culture that engages employees in our ESG goals by doing the following:

  • Including ESG topics as part of firm wide briefings of the investment professionals.
  • Promoting relevant employees’ participation in ESG opportunities to further support ESG awareness and best practices within the company.
  • Appointing an ESG officer responsible for overseeing the management and implementation of this policy.
  • Forming an ESG Committee comprised of a broad cross section of firm employees to manage the firm’s ESG policies and practices.
  • Periodically reviewing and updating our ESG policy as the approach to managing ESG issues evolves.

ESG Considerations in Investment Analysis and Due Diligence

ESG issues present regulatory, market, reputational and operational risks and opportunities that should be considered when analyzing a prospective investment. To ensure compliance with our fiduciary duties, our process for identifying ESG risks and opportunities prior to committing to a potential investment is as follows:

  • Identify ESG related risks and opportunities that may affect the investment based on the investment’s asset class and location.
  • Analyze the materiality of these issues in relation to a realistic and practical view of the investment and future value and the ESG impacts.
  • Consider the costs and benefits of potential remedial measures for ESG risks and assess our capacity to initiate change.
  • Include the consideration of ESG risks and opportunities in investment presentations to the Investment Committee.
  • If there are ESG issues that do not prohibit investment, establish a management plan with the necessary steps to mitigate the risk or capitalize on the opportunity.
  • Engage with internal and external resources as necessary throughout the investment analysis process.

Use the following as a non-exhaustive guide for relevant considerations of a target investment’s ESG risks and opportunities:

  • Environmental Issues: Pre-existing environmental conditions, climate change, greenhouse gas emissions, pollution generation, energy sources (or energy generation), water sources and supply, waste generation and management, recycling programs, resource conservation, energy efficiency, chemical safety and potential impact of natural disasters.
  • Social Issues: Equal employment and labor laws, political risks and involvement, fair compensation, worker health and safety, human rights abuses, charitable contributions and community relations.
  • Governance Issues: Transparency, accountability, internal controls, risk management, executive and management compensation, organization structure, diversity of workforce, conflicts of interest and legal and regulatory compliance.

ESG Considerations for Portfolio Companies

Our consideration of ESG risks and opportunities continues through the life of an investment as necessary. In accordance with the plan established during the investment analysis process, our asset managers will work with each portfolio company’s management team to increase awareness, mitigate ESG risks and create value through ESG opportunities. This is done by the following:

  • Provide ESG policies and other ESG information to portfolio companies’ management teams when relevant.
  • Ensure that the risks and opportunities are properly documented throughout the investment and mitigated or capitalized to the fullest extent possible.
  • Encourage and empower portfolio company management teams to advance their own independent, robust approaches to ESG and sustainability management.
  • Support and monitor each portfolio company’s management team to identify any new ESG risks and opportunities as they may arise with changing circumstances in the community, environment and nature of the company.