Quick Glance At ESG Trends In Fund Financing

The past few years have seen a continuous growth in the Asian fund finance market in the use of environmental, social or governance (ESG) or sustainability-linked lending (SLL) facilities.

Apart from syndicated facilities or those with higher values, green elements have also been incorporated in bilateral or smaller facilities. Investment approach has become diverse too, leading to an increase in performance-based facilities where pricing is often pegged to performance against an agreed set of key performance indicators (KPIs) and use of proceeds facilities which provide for pricing incentives for loan facilities used for ESG-related purposes.

Setting KPIs and in some cases sustainability performance targets (SPTs) are no easy tasks – the UK and EU have sought to create certain frameworks or requirements relating to criteria, classification and disclosure of sustainable products. Asset managers, owners and general partners (GPs) are incorporating ESG in their