With sustainability becoming high on the agenda of many sponsors’ boards and with Environmental, Social and Governance (ESG) matters becoming a focal point in debt and equity markets, Elgar Middleton can assist in incorporating ESG-linkage into any debt facility and equity raise.
ESG-Linked Debt Facilities
Sponsors are increasingly driving the inclusion of an ESG-framework in their debt structure.
ESG-linked loans seek to encourage sponsors and investors to improve their sustainability performance through a monetary reward for complying with pre-agreed targets, and a penalty for missing them.
This is typically achieved by including an ‘ESG ratchet’ on the margin. See below an indicative margin ratchet framework.
Elgar Middleton can incorporate ESG-linkage into a variety of different debt products including revolving credit facilities, senior term loans and mezzanine debt.
Sample scope of works for an ESG-linked debt facility
ESG-Linked Equity Raises
Similar principles can be applied in the context of an equity raise.
For example Elgar Middleton can structure a shareholder loan with an ‘ESG ratchet’ being applied to the coupon rate – with a positive premium for failing to meet pre-determined KPIs, and a reduction for meeting them.
Alternatively, we can assist developers in raising finance with a monetary reward, in the form of deferred consideration, being paid out upon the achievement of pre-agreed ESG KPIs at some time frame following the initial financial close.
To learn more about how Elgar Middleton can help incorporate ESG-linkage into your debt facility or equity raise, please get in touch.