Global investment
company The Carlyle Group has launched the largest private equity revolving credit
facility linked to environmental, social and governance (ESG) criteria in the
US, for $4.1bn. Structured as a sustainability-linked loan (SLL), the price of
the debt is directly tied to the company’s goal of having 30% diverse [1] directors on the boards of the companies it controls within two years of
ownership.
The three-year
revolving credit facility (RCF), which was structured for Carlyle’s Americas
corporate private equity funds, reflects the growing trend of corporate and
institutional clients using innovative financing to help drive positive social
outcomes within their organizations as well as in underrepresented local
communities.
According to Carlyle’s own research, on average, the earnings of its portfolio
companies that have two or more diverse board members have been about 12% higher
than those that do not – highlighting the positive correlation between board
diversity and performance. Further, the integration of greater background
diversity at board level may provide new avenues to tackle ESG challenges
towards which the private sector can contribute positively.
The innovative SLL
“directly supports the firm’s ongoing commitment to increasing board diversity
as part of our integrated approach to building better businesses,” said
Carlyle CEO Kewsong Lee in a press release.
BNP Paribas is a
member of the syndicate of banks backing this deal. The Bank has experience
with pioneering equality-based SLLs, serving as the sole sustainability
coordinator on the first ever SLL with such metrics in North America for
Montreal-based WSP Global, a professional management and consultancy
service firm, in February 2020. In the private equity sphere, BNP Paribas has
acted as sole sustainability coordinator on the first-ever syndicated SLL in
Europe by a private equity firm for Eurazeo in January 2020, as well as agent,
sustainability agent and joint sustainability coordinator for the then
largest-ever credit line linked to responsible investment metrics in private
equity for Stockholm-based EQT in June 2020.
Joseph Malley, BNP
Paribas Head of Financial Institutions Coverage, Americas, said: “Carlyle’s sustainability-linked
loan is an example of the progress we are seeing with organisations adding
diversity and other social improvement targets to their financing. BNP Paribas is committed to
partnering with major owners and drivers of capital, such as Carlyle, to
further the topic of ESG and close the diversity leadership gap around the
world.”
[1] The Carlyle Group
defines diverse members in the US (and where local regulations allow it) as
women and people from ethnic minorities; globally it defines them as women.