Debevoise & Plimpton LLP has advised a private equity fund managed by EQT in a new €2.3 billion subscription line facility (with the potential to increase up to €5 billion), which incorporates innovative environmental, social and governance (“ESG”) mechanics.
The facility, signed with a large syndicate of lenders, is the largest of its kind across the global fund finance markets.
The margin on the facility will be adjusted through a mechanism designed to accelerate the fund’s ESG performance. The portfolio companies of EQT will be measured against ESG key performance indicators (“KPIs”) which are tailored to EQT’s firm wide ESG targets. The mechanism looks to incentivize (a) the taking of responsibility for ESG performance at each individual portfolio company and the setting of ambitious ESG targets, (b) gender equality on each portfolio company board and (c) a transition by portfolio companies to use of renewable energy. Depending on performance against these ESG KPI’s, the margin payable to the subscription facility lenders may increase or decrease.
This mechanism is amongst the very first of its type to be used in a fund financing, and sets a new bar in terms of the scale and complexity of the ESG KPIs and mechanism used.
The Debevoise team advising EQT on the facility was led by partner Thomas Smith, and included associates Felix Paterson, Alex Bell and Andrew Burnett.