EQT, a global investment manager with €40 billion AUM, announced today that it has launched an ESG-linked Subscription Credit Facility (SCF) related to its Private Equity business line. The SCF is currently at €2.3 billion and has an upper limit of around €5 billion, making it the largest ever ESG-linked fund bridge facility in the global fund financing markets, according to EQT.
The ESG-linked SCF is intended to help inspire and incentivize portfolio companies in improving their ESG performance, aligning with the firm’s efforts to encourage the systemic change needed to reward positive contributions to society.
The SCF is backed by a syndicate of leading global financial institutions, including BNP Paribas and SEB acting as Sustainability Coordinators and BNP Paribas as Agent and Sustainability Agent. The pricing mechanisms are directly linked to EQT’s firm wide elevated societal targets around diversity and climate as well as EQT’s proven governance model and strong commitment to transparency. They are designed to incentivize the performance of portfolio companies in the areas of i) gender equality on the board of directors and ii) renewable energy transition, supported by iii) a fundamental sustainability governance platform.
Working closely with dedicated and experienced advisors, EQT and the future portfolio companies will develop customized roadmaps to deliver on the elevated societal ambitions, with measurable KPIs on which they will report quarterly and be audited annually. The aggregated results from the portfolio companies’ ESG efforts will later be compared with the pre-set KPI targets, with the portfolio’s averaged fulfilment rate impacting the ESG-bridge facility’s interest rate. Portfolio companies that show better ESG progress ultimately receive better financing terms.
Commenting on today’s launch, Per Franzén, Partner and Co-Head of the EQT Private Equity Advisory Team, said:
“This is a game changing moment for EQT but also the private equity industry, further evidencing how our industry also can benefit from sustainable financing. For us, ESG plays a crucial role in how EQT future-proofs companies and with an ESG-linked bridge facility, we bring a new dimension to EQT’s value creation process. By linking sustainability objectives to hard incentives, we are really challenging ourselves and the portfolio companies to fully embrace the potential of sustainability – it’s really quite simple, sustainable business is good business and creates better value for all stakeholders.”
Therése Lennehag, Head of Sustainability at EQT, added:
“The entire financial community faces a challenge in accessing reliable and comparable ESG data – with this ESG-linked financing facility, we actively contribute to increasing the availability of high-quality ESG data, critical for the financial markets to be able to build a resilient and regenerative economy. We need innovation to accelerate system-wide transformation and it is particularly rewarding that we could launch the SCF despite the challenging marketplace we are currently seeing. It is a strong signal that leading global financial institutions are ready to partner with responsible investors and owners to ensure we all optimize for risk, returns and positive real-world outcomes.”
Guillaume Hartog, Head of Subscription Finance at BNP Paribas, said:
“BNP Paribas is a strong promoter of sustainable finance, notably in the bond and loan markets. Private equity is still very much a new frontier and it has been a privilege to support such a sustainability pioneer as EQT. By closely aligning their sustainability and financing strategies through the ESG structure featured by this subscription facility, EQT established a new benchmark transaction for subscription finance.“
Christopher Flensborg, Head of Climate and Sustainable Finance at SEB, added:
”Having worked with sustainable finance for more than a decade, being involved as a pioneer across the world and in most sectors, I can tell that the work and commitment we have seen throughout our engagement with EQT on this facility are both impressive and encouraging; and despite that we all have a long way to go, it brings both hope and trust.”