FSN Capital, a mid-market private equity firm with an ESG pedigree, has just raised €1.8 billion for its sixth fund.
Attached to the fund is the firm’s first ESG-linked subscription facility. As detailed on FSN’s website, the interest rate on the facility can increase or decrease in line with performance against three KPIs relating to: greenhouse gas emissions, ESG strategy and governance, and diversity. Like other managers with ESG-linked sub lines in place, FSN declined to quantify the extent of the movement. Says the firm: “Progress will be reported semi-annually to the banks under the facility, with the key pillar being our annual ESG report.”
Other notes on FSN’s fundraise:
- It’s a jump in fund size; the predecessor was €985 million. For this fund, it had to nudge up its hard-cap “a modest amount” to accommodate some larger investors in the final close, said partner and COO Morten Welo.
- It took longer than anticipated – around a year from first close to final close – on account of covid-related disruptions, said Welo. Some investors who had already conducted due diligence or passed investment committee had paused as the pandemic escalated. However, momentum picked up from Q4 2020 onwards.
- It’s classified as an Article 8 or “light green” fund under the EU’s new Sustainable Finance Disclosure Regulation. Given the bulk of the fundraising happened prior to the EU SFDR coming into effect in March this year, no conclusion can be drawn as to whether this galvanised any LP commitments.
- FSN was an early mover on sustainability. The firm uses the strapline “decent people, making a decent return in a decent way” and has been reporting publicly on its portfolio companies’ ESG performance annually since 2013. “It has been part of our culture since day one,” Welo said.