EQT today announced the entry into an ESG-linked Subscription Credit Facility related to the Private Equity business line (the “SCF” or “bridge facility”). This is an important milestone on EQT’s sustainability and transparency journey, as the firm seeks to encourage the systemic change needed to reward positive contributions to society. The ESG-linked SCF is yet another example of how EQT will inspire and incentivize portfolio companies in improving their ESG (environmental, social and governance) performance. Adding an ESG perspective into the financing structure manifests EQT’s commitment to an integrated sustainability approach and alignment with the global sustainability goals.
The SCF, which is currently at EUR 2.3 billion and has an upper limit of around EUR 5 billion, 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. It is the very first ESG-linked fund bridge facility of this size in the global fund financing markets. The bridge financing facility will be coupled with a pricing mechanism designed to accelerate the portfolio companies’ ESG performance. 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. The pricing mechanism for the SCF is 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.
EQT and the future portfolio companies will work closely with dedicated and experienced advisors to 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. The portfolio’s averaged fulfilment rate will impact the ESG-bridge facility’s interest rate. Or explained in a simplified manner - the better ESG progress the portfolio companies show, the better the financing terms. A win-win situation, as portfolio companies become more resilient through these actions.
Per Franzén, Partner and Co-Head of the EQT Private Equity Advisory Team, commented: “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: “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: ”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.”
EQT has long considered sustainability an integral part of its business and core to identifying and capturing value creating opportunities, and embarked on its dedicated sustainability and transparency journey over a decade ago. EQT was an early signatory of the UN PRI, has developed an industry leading sustainability framework to inspire and monitor development within its portfolio of companies while constantly raising the bar in how the firm integrates sustainability throughout its entire investment and ownership processes.
Nina Nornholm, Head of Communications, +46 70 855 03 56
EQT Press Office, email@example.com, +46 8 506 55 334
EQT is a differentiated global investment organization with a 25-year track-record of consistent investment performance across multiple geographies, sectors and strategies. With strong values and a distinct corporate culture, EQT manages and advises funds and vehicles that invest across the world with the mission to generate attractive returns to the fund investors.
EQT’s talent base and network allow it to pursue a thematic investment strategy and distinctive value creation approach, with the aim of future-proofing the companies which EQT invests in, creating superior returns to EQT’s investors and making a positive impact with everything EQT does. EQT has more than EUR 62 billion in raised capital since inception, currently around EUR 40 billion in assets under management across 19 active funds within three business segments – Private Capital, Real Assets and Credit.
EQT is a thought leader within the private markets industry with deep expertise in responsible and long-term ownership, corporate governance, operational excellence, digitalization and sustainability. EQT has offices in 17 countries across Europe, Asia Pacific and North America with more than 700 employees. The EQT AB group comprises EQT AB (publ) and its direct and indirect subsidiaries, which include general partners and fund managers of EQT funds as well as entities advising EQT funds.