ESG in Private Credit: More dialogue needed between investors and issuers
ELFA and KBRA co-hosted an event on the 13th September discussing ‘ESG in Private Credit’ with experts across the sector.
Already a member? The Principles for Responsible Investment (the PRI) and the European Leveraged Finance Association (the ELFA) on 28 January held a disclosure and engagement workshop on environmental, social and governance (ESG) topics, bringing together sub-investment grade corporate borrowers and credit analysts from investment institutions and credit rating agencies (CRAs) to discuss sector-specific ESG disclosure and engagement. The virtual roundtable event, which is part of a series, attracted over 100 market participants.
The sector-specific workshops focused on the chemicals, industrials, retail, technology and software, and communications infrastructure sectors. It follows a similar event in September 2020 which culminated in the publication of the first sector specific ESG Fact Sheets in January, covering the debt collectors, paper and packaging, and telecoms sectors, together with a General ESG Fact Sheet. The ESG Fact Sheets are available for download here.
These events are part of a collaborative effort between the PRI and the ELFA designed to increase ESG disclosure and deepen engagement on financially material ESG factors between companies, CRAs, and credit analysts in the leveraged finance market.
Representatives from the following companies, among others, were present at the event: Anaqua, Cellnex, Groupe Delachaux, EG Group, Exact, IGM Resins, Ineos, ION, Loxam Rental, Maxeda, OCI, Röhm, SNF, Synthomer, and TK Elevator.
The ELFA has also co-published with the Loan Market Association (the LMA) a Guide for Company Advisers on ESG Disclosure in Leveraged Finance Transactions (the “Guide”), which was drafted by a working group of legal and sellside professionals. The Guide is designed to be used together with the ESG Fact Sheets to incorporate ESG information into company offering materials and reporting. Additional workshops will be hosted over the coming months in order to incorporate more sectors into the initiative.
The ELFA and the LMA will also host events for company advisers to solicit feedback on the Guide. The PRI and ELFA will publish a briefing on the workshop findings over the coming weeks, as well as ESG Fact Sheets on a sector-bysector basis over the coming months.
Carmen Nuzzo, head of fixed income at the PRI, commented: “The workshop series highlights that the interplay between ESG factors is complex and varies within the same sector level by company and even within the same firm. However, this complexity should not be the enemy of progress and, by creating opportunities for engagement, the PRI is creating meeting of minds as well as synergies with industry organisations like the ELFA.”
Sabrina Fox, CEO of the ELFA, commented: “We were delighted to have so many companies and credit analysts engaged on ESG topics at a sector-level basis. The first set of ESG Fact Sheets have been very well-received, and we plan to use the same process to create ESG Fact Sheets covering these sectors using the valuable input gained at the event. Bringing companies and credit analysts together to discuss these issues will go a long way to promoting consistency in ESG disclosure.”
Investors interested in taking part in future events should contact carmen.nuzzo@unpri.org and company advisers should reach out sfox@elfainvestors.com.
