LCP highlights role of ESG performance incentives

Loan incentives and disincentives for achieving ESG ratings can encourage better performance, Lane Clark & Peacock (LCP) has said. In a survey of private credit managers in Europe's mid-market space, LCP found around one quarter of loans contained ESG "margin ratchets" which offered companies lower borrowing costs for meeting ESG targets. In the survey, most managers provided a ‘one way' ratchet where borrowing costs adjusted downwards, but around one third provided a ‘two way' ratchet where a penalty was introduced for borrowers that failed to reach targets. Around half of loans w...