PAG, a $50 billion AUM Asian alternatives firm, has secured a sustainability-linked subscription credit facility for its private debt business, the firm has said. This type of fund finance facility, where the cost of servicing the facility is linked to ESG performance, has become more commonplace among private markets firms of all sizes around the world. This latest development follows a number of other sizeable ones in Asia, namely Carlyle’s $2.8 billion private equity facility and Baring Private Equity Asia’s (now part of EQT) $3.2 billion facility.
This is not PAG’s first: the firm arranged a sustainability-linked facility for its private equity business in 2022. PAG invests in private equity, real assets and private debt. In December last year it closed its fifth loan fund on $2.6 billion.
The firm did not disclose the size of either of its credit facilities, instead describing the latest one as “believed to be the largest of its kind for a private credit fund in Asia-Pacific and the first to feature a sustainability-linked framework with multiple targets”. As is often the case with such facilities, the extent to which the margin can be adjusted in line with ESG performance was not disclosed.
Five lenders acted as joint sustainability co-ordinators, said PAG: Australia and New Zealand Banking Group; Mitsubishi UFJ Financial Group; National Australia Bank; Societe Generale Group; and United Overseas Bank.
ISS Corporate Solutions issued a Second Party Opinion for the facility verifying its alignment with the Sustainability-Linked Loan Principles, a set of global standards published by the Asia-Pacific Loan Market Association, PAG said.
The rate margin is linked to performance against four ESG-related key performance indicators:
- Achievement of climate-related milestones by borrowers during their loan terms.
- ESG-focused training for PAG investment teams.
- ESG-focused training for borrowers.
- Measurable improvements in borrowers’ environmental, social, and governance (ESG) management and performance during their loan terms.
More context on sustainability-linked subscription credit lines can be found here.