Social credit

Carlyle Group has arranged what it says is the world’s first ESG-linked PE credit facility tied entirely to social KPIs. The $4.1 billion facility’s pricing is linked to the firm’s self-imposed goal of having 30 percent diverse directors on the boards of portfolio companies within two years of ownership, Carlyle’s chief diversity, equity and inclusion officer Kara Helander (above, left) and global head of impact Megan Starr tell sister title Private Funds CFO (registration or subscription required). Here are some key takeaways:

• All of the firm’s US corporate PE funds are eligible to draw on the line, with the discount applied on a fund-by-fund basis.
• The firm estimates that the line may save as much as $6 million in interest expense.
• Carlyle anticipates using the structure again in other regions.
• Bank of America was lead on the deal, as well as global sustainability agent.

While ESG-linked credit lines have also found fans in KKR, EQT and Eurazeo, to name a few, such facilities may not suit every manager, as we explored in our Fund Finance Special last week.

CalSTRS on carbon

The California State Teachers’ Retirement System is putting its money where its mouth is when it comes to climate change. Investment staff at the $283 billion pension are proposing up to $150 million of co-investments focused on low-carbon solutions (eg, energy, water and waste management, food security) per year, per sister title Buyouts (registration or subscription required). CalSTRS has faced criticism in the past for owning fossil fuel assets, a decision it defended on the basis that divestment does not bring about change. As LPs increasingly focus on GPs’ efforts when it comes to the environment, we may see more institutions like CalSTRS taking matters into their own hands.

Dyal’s Vista stake

Vista Equity Partners founder Robert Smith is in talks over reducing Dyal Capital’s stake in the firm, according to Bloomberg (paywall). Smith is reportedly seeking a partial sale of Dyal’s position, which could be to one or more of its existing LPs or back to Vista itself. It comes during a rocky patch for the two firms, with Smith admitting in October to wilfully and knowingly participating in an illegal scheme to evade taxes, and Dyal facing pushback over its proposed merger with private credit firm Owl Rock. It’s unclear whether either of the two events have played any role in Vista’s decision to sell.

Essentials