In what it describes as a “first of its kind” in litigation finance, Kerberos Capital Management will provide $200 million in credit to law firms with ESG-linked margin ratchets.
The Chicago-headquartered firm told New Private Markets that it is seeking to raise $300 million for its third private debt fund, of which a minimum of $200 million will be allocated to these ESG-linked loans.
In a statement, Kerberos said law firms could qualify for loans and achieve lower margins based on KPIs in three areas: providing pro bono legal services, working on ESG-related cases and applying exclusions for ESG-adverse cases.
The firm specialises in litigation finance. It told New Private Markets that it provides capital to law firms via recourse and hybrid debt, and law firms’ cases provide collateral for these loans. Litigation finance is an emerging asset class within private debt, affiliate title Private Debt Investor reports (registration or subscription required).
Law firms have been ‘tooling up’ on ESG to meet private markets clients’ rising demand for ESG-related legal services. These include litigation related to climate, social and human rights harms; ESG due diligence; and meeting regulatory obligations.