ESG-linked subscription credit lines have become a familiar feature among sustainability-minded private fund managers large and small. Typically borrowing GPs can achieve a discount on the facility’s margin by meeting one or a small handful of predetermined sustainability goals. For Carlyle, the facility will be tied to three ESG-related KPIs:
- Measuring the carbon footprint of all majority-owned companies beyond six months of ownership;
- Achieving 30 percent board diversity in all majority-owned companies;
- Providing all portfolio company board members employed by Carlyle with ESG training.
The facility is similar to the €2.3 billion line agreed for its European private equity and real estate funds in September 2021. The firm also announced a $4.1 billion credit line tied to board diversity for its American private equity funds in February of the same year.
“We think of impact as a process, rather than as a product,” head of impact Megan Starr told affiliate title Real Estate Capital at the time. “Our focus, therefore, is on how we can invest in companies that may still need to improve their sustainability credentials – which is why we really like ESG-linked credit financings, because they are a great example of one of the many tools available in a private equity toolkit to embed financial incentives and help that ESG transition by driving environmental and social progress.”
Other firms to secure such facilities include EQT, Actis, Baring Private Equity Asia and Helios Investment Partners, as well as Carlyle-owned AlpInvest.