News & Analysis

In brief: LPs are interested in ‘climate above all else’, says Muzinich’s Bode

Notes from a call with Kirsten Bode, co-head of European private debt at Muzinich & Co, on ESG margin ratchets, SFDR and ESG exclusion lists.

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New Private Markets recently caught up with Kirsten Bode, co-head of European private debt at Muzinich & Co, to talk all things ESG. Muzinich manages public and private credit strategies globally. Here are some key takeaways:

  • Muzinich has an ESG exclusion list for some sectors. Sometimes the firm’s LPs will add sectors to that list through side letters, which then means the whole strategy has to abide by the additional exclusions.
  • ESG-linked margin ratchets: Bode is seeing these more and more in the lower mid-market. Three of the four deals they have done from their latest strategy have included these.
  • The most recent Pan European strategy is classified as an Article 8 fund under SFDR, which involves gathering various data points to monitor the principle adverse impacts.
  • The Muzinich private debt team is mulling whether to use external ESG ratings agencies to help with its analysis (but the challenge here is that in the lower-mid market there are different best in class providers from jurisdiction to jurisdiction).
  • What are LPs interested in from them in terms of ESG? “Climate above all else.”