Asia-Pacific investment firm PAG has established a sustainability-linked subscription line credit facility for funds managed by its private debt strategy.

PAG says the facility links the interest rate margin to the sustainability performance of the fund and is believed to be the largest of its kind for a private credit fund in Asia-Pacific and the first to feature a sustainability-linked framework with multiple targets.

The sustainability-linked facility interest rate margin is linked to performance against four ESG-related key performance indicators (KPIs):

Achievement of climate-related milestones by borrowers during their loan terms
ESG-focused training for PAG investment teams
ESG-focused training for borrowers
Measurable improvements in borrowers’ environmental, social, and governance (ESG) management and performance during their loan terms

Achievement or non-achievement of targets associated with each of these four KPIs results in a commensurate decrease or increase of the facility interest rate margin. Consistent fulfilment of these targets annually will see a reduction in the total interest paid by the fund over the facility term.

Anshumann Woodhull, PAG Partner and Co-Head of Private Debt says, “Positive ESG impact drives long-term value for our investors and is an integral part of our culture and investment process. This landmark sustainability-linked facility is the latest example of how our focus on ESG directly translates into enhanced returns for our investors.”

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