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Bonds & Loans: $4bn credit line for private equity firm linked to board diversity at portfolio companies

A weekly overview of ESG developments for fixed income

US investment firm the Carlyle Group has landed the largest ever ESG-linked private equity credit facility, which will be tied to board diversity targets. Pricing for the $4.1bn will depend on whether Carlyle’s portfolio companies can achieve 30% ‘diversity’ on their boards within two years of ownership. The definition of ‘diversity’ was not provided in the press release, but the assessment will be based on “measurable KPIs”, the borrower said, adding: “Over the past three years, Carlyle’s research has shown that the average earnings growth of Carlyle portfolio companies with two or more diverse board members has been approximately 12% greater per year than companies that lack diversity, underscoring the correlation of board diversity with strong financial decisions and performance.”

Brewing giant Anheuser-Busch InBev has secured a $10.1bn sustainability-linked loan, the largest ever, and the first among publicly listed companies in the alcohol sector. The five-year revolving credit facility has a pricing mechanism based on four KPIs: improving water efficiency in the firm’s breweries, increasing the use of recycled content in packaging, sourcing energy from renewable sources, and reducing GHG emissions.

Clothing company VF Corporation has fully allocated the proceeds from its inaugural €493m green bond. The proceeds, allocated to 13 of the company’s sustainability projects, saw 2 million trees planted and over 970 million litres of water saved through water conservation initiatives, according to the firm. Almost half the proceeds (€243m) were spent on recycled materials, with a further €162m spent on sustainable cotton.

The Government of Singapore will issue green bonds for select public infrastructure projects. Channel News Asia reported that the Tuas Nexus waste and water treatment facility will be one of the projects that is to be financed with the bonds.

Clothing company H&M has issued a €500m, 8.5-year sustainability-linked bond linked to three KPIs, which H&M has committed to achieving by 2025. The company must increase its share of recycled materials to 30%; reduce emissions from its own operations, heat and electricity purposes by 20% from 2017 levels; and reduce total emissions from raw materials, production, and clothing manufacturing and transport by 10%. SEB acted as the sustainability structuring advisor.

Singapore-based real estate developer and logistics specialist GLP has secured a $658m sustainability-linked loan to finance green buildings and climate-related projects. The interest rate for the three-year revolving credit facility is tied to improvements in GLP’s Sustainalytics ESG Risk Rating. ING acted as lead sustainability structurer and coordinator for the deal, which involved nine other banks. GLP has produced a Green Finance Framework – reviewed by Sustainalytics – which outlines projects eligible for financing under the new loan, as well as future green bonds or loans. A real estate investment trust belonging to GLP has already issued a green bond for retail investors and multiple sustainability bonds.