Amy Kennedy Authors New Private Markets Article on Growing ESG Concerns in Leveraged Loans Markets
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New Private Markets has published the article “The rise of ‘sustainability-linked’ leveraged loans,” written by Akin Gump corporate partner Amy Kennedy. The article looks at the increasing focus on environmental, social and governance (ESG) factors, which, Kennedy says, has caused the European leveraged finance market “to adapt and respond.”
The impetus to embrace ESG, Kennedy writes, “is coming from both borrowers and sponsors, as well as lenders,” with two specific debt products having emerged in response to ESG pressures and concerns. One, according to Kennedy, is “‘green’ instruments, the key feature of which is that the proceeds of the financing are used for ‘green’ purposes.” The other is “‘sustainability-linked’ instruments, under which certain terms are tied to the issuer’s performance against certain pre-determined sustainability-linked key performance indicators.”
Kennedy goes on to note that, while there are challenges “when introducing anything ‘new’ into an established market and there remain a number of open questions and areas of debate,” the leveraged markets in Europe have embraced ESG and sustainability-linked lending. With a “similar story” in the U.S. markets, Kennedy notes, “it is expected that ESG and sustainability-linked instruments in the leveraged markets will only continue.”
To read an Akin Gump client alert that Kennedy co-authored, on which this article is based, please click here.
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