Hong Kong-based alternative investment firm Baring Private Equity Asia (BPEA) has secured a sustainability-linked loan worth up to $3.2 billion for environmental, social and governance (ESG) investments across Asia, according to a statement.
The initiative is the first and largest to be launched in Asia by a private equity firm, with initial commitments of approximately $1.5 billion, BPEA said.
The facility will be subject to sustainability performance targets (SPTs) with a focus primarily on gender diversity and climate change.
The Hong Kong-based investment firm added that it will reduce the interest rate of the loan if it can achieve the SPTs. Proceeds will be used to support BPEA’s private equity investment platform.
BPEA said it will require portfolio companies to build “a stronger and more supportive environment for female talent to thrive.” Meanwhile, to tackle climate change, BPEA’s portfolio companies will improve greenhouse gas emissions reporting, set climate targets, and ultimately drive emissions reduction.
The establishment of the loan facility will see BPEA strengthen its investment process by integrating enhanced ESG risk and opportunity assessments to inform ESG action plans for each portfolio company.
“We recognize the correlation between strong, sustainable business practices and value creation. The facility’s ambitious targets incentivise our firm and our investee companies to aspire to higher standards while also encouraging long-term thinking on key topics like climate change to drive positive change for the communities in which we operate,” said Jean Eric Salata, CEO and founding partner of BPEA.
The private equity firm is currently in the market to raise $8.5 billion for its eighth buyout fund. The fund will allocate up to 10% of its capital to growth-stage investments, alongside traditional buyouts.
Its seven first funds have generated a combined net return of 1.64 times invested capital, a net IRR of 14.9%, and a net DPI of 0.64 times invested capital as of March 31, 2021, according to the Employees Retirement System of Rhode Island, which is planning to commit up to $50 million to the eighth fund.
Baring Asia Private Equity Fund VIII has also received commitments from the Illinois Municipal Retirement Fund, the Teacher Retirement System of Texas, and Louisiana State Employees’ Retirement System.