Carlyle is a global investment firm that deploys private capital across three business segments: Global Private Equity, Global Credit and Investment Solutions. With $293 billion of assets under management as of 30 September 2021, Carlyle’s purpose is to create value on behalf of its investors, portfolio companies and the communities in which it operates.
The global firm, which employs more than 1,800 people in 26 offices across five continents, puts strong emphasis on helping its portfolio companies improve across a number of sustainability dimensions. These include efforts to: increase diversity and inclusion, specifically at the board level; integrate tailored ESG plans to reduce risk and drive value creation; and support navigating the impact of climate change and the energy transition.
Carlyle’s research has shown that the average earnings growth of Carlyle portfolio companies with two or more diverse board members has been approximately 12% greater per year than companies that lack diversity, underscoring the correlation of board diversity with strong financial decisions and performance. In 2016, the company set a goal within its US private equity business to have diverse boards for all of its majority-owned portfolio company boards within two years of taking control of the company. At the time, 38% of eligible boards met the goal. Four years later, that figure rose to 88% overall and 100% in its flagship US Buyout funds.
In 2020, Carlyle set a goal to achieve 30% board diversity across its majority-owned private equity companies globally by 2023. In calendar year 2020, 56% of new directors added to goal-eligible companies globally were diverse; in Europe, that figure was 89%.
Introducing sustainability features into IBLF
Carlyle has secured over $10 billion in ESG-linked financing globally to date. This includes the largest ESG-linked private equity credit facility in the US for $4.1 billion (marking the industry’s first facility to focus exclusively on advancing board diversity), as well as the integration of environmental considerations into financing arrangements of its portfolio companies, a tool the firm has pioneered across Europe in recent years to incentivise climate progress at the company level.
In 2021, the firm was also looking to introduce sustainability features into its existing €2bn Investor-Backed Leverage Facility (IBLF) for its European private equity and real estate platform – which NatWest coordinated for Carlyle in 2017 – as well as upsize the facility to €2.27bn and refresh the tenor to 3+1 years.
The NatWest deal team acted as Lead Arranger and Facility Agent, committing €450m to the facility, with four of the other five existing lenders also remaining, while four new lenders entered the financing agreement.
In addition to its board diversity target, Carlyle has linked this upsized European facility to the following two sustainability goals:
- having more accurate and comprehensive measurements of greenhouse gas emissions across all portfolio companies
- improving ESG outcomes through better governance by providing ESG training for all Carlyle board directors
Long-term value and positive change
James York, Head of Investor-Backed & GP Financing, NatWest, said: “We are delighted to have had the opportunity to arrange this facility for our customer Carlyle, in one of the largest ESG-focused credit facilities we have worked on in recent years. This transaction is a great example of the whole of NatWest jointly working for our customers to help them accelerate sustainable growth.”
Kim Slater, Head of Loan Markets, NatWest, added: “We are very pleased to have reached another important milestone for Carlyle, securing the upsizing of its Investor-Backed Leverage Facility that will support their ambition to increase board diversity in their portfolio companies. We’re excited that we can actively contribute to social, economic and environmental progress by supporting customers such as Carlyle.”
Caroline Haas, Head of Climate & ESG Capital Markets, NatWest: “It has been a pleasure working with Carlyle as they spotlight their leadership in the ESG landscape, encouraging behavioural change across their portfolio companies in the private finance arena.”
Kewsong Lee, CEO at Carlyle, commented: “For many years Carlyle has been driving significant progress on board diversity in our portfolio companies on a global basis, recognising the correlation with strong financial decisions and performance. This European ESG-linked credit facility closely follows that of our Americas private equity platform, and together represent a significant moment in Carlyle’s strategy to reinforce our commitment to achieving greater diverse board-level representation.”
Megan Starr, Global Head of Impact at Carlyle: “We are proud that Carlyle is a pioneer in integrating ESG considerations into the financing arrangements of portfolio companies in Europe and the US. In aggregate this represents approximately $10 billion in financings for our US and European private equity funds and illustrates an important milestone in our journey to align successful investment and sustainability outcomes, and to deliver long-term value and positive change for all stakeholders.”
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