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Private Equity Firm Enters ESG-Linked Fund-Level SCF

Posted on June 15, 2020

Posted in Environmental, Social, and Governance

The ESG performance will be measured quarterly, with the average performance of the portfolio companies judged by reference to three KPIs.

By Paul Davies, Dominic Newcomb, Farah O’Brien and Michael Green

On 11 June 2020, private equity firm EQT announced that it has entered into an environmental, social, and governance–linked fund-level subscription credit facility (SCF) with an upper limit of around €5 billion[1]. The SCF, which is currently at €2.3 billion, is believed to represent the largest ESG-linked facility seen to date on the global fund financing markets, and is further evidence of the increasing interest in ESG among private equity firms.

Potential Liability for Ignoring Non-Financial Factors in Investment Starts With Climate Change

Posted on December 13, 2016

Posted in Air Quality and Climate Change, Environmental, Social, and Governance, Green Finance

By Paul Davies and Michael Green

Commercial risks to businesses can no longer be neatly divided into financial and non-financial considerations. For example, there is growing recognition, particularly in the pensions sector, that a failure to take account for environmental and social governance (ESG) risks (in particular, climate change risks) can result in adverse financial consequences. While a revised EU directive will impose an obligation on pension fund managers to consider ESG issues, pension trustees may already be subject to potential legal liability if they ignore material financial risks resulting from climate change (traditionally considered only a moral or ethical concern) in investment portfolios, according to legal counsel.

EU Workplace Pensions Now Required to Incorporate ESG Issues

Posted on December 6, 2016

Posted in Environmental, Social, and Governance, European Environmental and Public Law, Green Finance

By Paul Davies and Michael Green

A new pensions directive was passed by the European Parliament on 24 November securing 512 votes (only 77 votes against and 40 abstentions), requiring EU workplace pension funds to consider environmental, social and governance (ESG) issues. This is considered a ‘landmark’ moment for responsible investment.

The new pensions directive stipulates that:

ESG criteria is to be considered in investment decisions and their practical implementation should be disclosed in regular reports.

Pension funds have to include their ‘stranded asset‘ strategy as part of their risk management procedure.

The integration of ESG considerations will not be considered as conflicting with fund managers’ fiduciary duties. Fund managers will not be exposed to legal liability for an alleged failure to act prudently by prioritising ESG factors over financial risk returns in their investment decisions.

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