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  directors on the boards of the companies it controls within two years of ownership.
Investment giant Carlyle secures Americas' largest ESG-linked credit facility, and the first with debt price tied directly to board diversity.
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."
 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.