Overview of Permira Credit ESG-related developments
Overview of Permira Credit ESG-related developments
Permira Credit is one of the leading specialist private credit platforms in Europe. Founded in 2007 as the private credit business of Permira, the team today comprises 80 professionals.
Permira Credit has worked with more than 300 companies1 as well as a significant number of private equity sponsors, management teams and advisors since its establishment.
Permira Credit is deeply embedded in the European private credit market and has established what we believe is a strong reputation as a trusted and supportive partner to businesses and private equity sponsors seeking debt financing.
Our strategies
Integrating ESG risks across our strategies
Our direct lending (PCS) funds provide long-term financing solutions to European mid-market companies. These companies are typically owned by third-party private equity sponsors.
The strategy continued to make strong progress in embedding ESG in its investment approach.
2022 highlights
Executed its first ESG margin ratchet, using EcoVadis ESG ratings, and seeking to embed the mechanism to offer ratchets in documentation for all new deals and refinancings2
Rolled-out cyber security cloud-based portfolio monitoring programme (launched Q1 2022)
0%
disclosure rate on ESG across the portfolio companies within the direct lending funds, collected via our annual ESG data questionnaire, based on key metrics outlined in the ESG Data Convergence Initiative3
We believe that it is increasingly the case that companies’ access to capital will be improved by the quality of their ESG foundation and credentials. Tools such as margin ratchets can be a powerful way to encourage companies to improve their ESG standing.”
Janine Harion
Managing Director, Head of Portfolio Monitoring Group
Our structured credit (Sigma) funds specialise in investing in European CLOs.
The strategy continued to make progress in the monitoring and reporting of ESG metrics for underlying CLO managers.
2022 highlights
Rolled out our third annual ESG survey to the funds’ underlying CLO managers, this year using European Leverage Finance Association’s (“ELFA”) new ESG survey, and received a 95% response rate.
For the first time, embedded ESG exclusion language in the legal documentation for Permira Credit’s latest structured credit fund, Sigma 6.4
We are pleased to see that in 2022 there have been increased levels of standardisation and transparency in analysing and measuring ESG factors. This enables investors and the wider market to make meaningful comparisons across the board."
Jihan Saeed
Managing Director, Head of Structured Credit
Our CLO management (Providus) platform manages eight CLO vehicles5, which invest predominantly in broadly syndicated leveraged loans to large-cap companies. These companies are typically owned by private equity sponsors.
The strategy strives to ensure ESG is part of interactions with key stakeholders, including investors, banks, sponsors and underlying portfolio companies.
2022 highlights
Enhanced the Providus exclusions list6
Maintained market leading ESG scores.7
We incorporate ESG analysis for two key reasons. First, we want to be good stewards of capital. Second, we believe that understanding ESG factors is a fundamental component to evaluating risk, and that, over time, we believe companies with good ESG standards are ultimately going to deliver better risk-adjusted returns.”
Jainesh Mehta
Associate Director, CLO Management
Engaging with portfolio companies
Our vision is to have sustainability be a substantial part of the funds’ investment approach, in particular for the buyout funds’ portfolio companies. It is considered from the very start of the investment process and guides the identification of opportunities.
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1 Number of companies as at 31 December 2022 that have received investment from Permira Credit direct lending funds, since inception of the strategy, and Providus CLOs since inception of the strategy.
2 Applicable to primary direct lending transactions.
3 The ESG Data Convergence Initiative is working to set six standardised ESG metrics: Scope 1, 2 and 3 GHG emissions; % renewable energy; board diversity; work-related injuries; net new hires; and employee engagement. Going forward, we plan to request portfolio companies in the direct lending (PCS) funds to report annually on these KPIs, amongst other metrics.
4 Sigma 6, the latest structured credit fund, held its final close in 2022. The ESG exclusion language in the legal documentation specifies that Sigma 6 will, on a best-efforts basis, endeavour to make investments where the CLO managers have included certain ESG exclusions policies in their latest CLO, e.g. controversial weapons, violations of the United Nations Global Compact (“UNGC”) and endangered wildlife.
5 As at 25 April 2023, when Providus CLO VIII closed.
6 Detailed exclusion criteria for the Providus CLOs are available on request.
7 Moody’s Analytics (CLO ESG Tool; 15 December 2022); analysis based on issuer-level scores for each asset, if available. If an issuer score is not available, the industry score for the asset is used instead. For illustrative and comparison purposes only. The CLOs in the Moody’s Analytics CLO ESG tool represent 483 European arbitrage CLOs and CDOs, which must have at least €100 million of collateral and at least one monthly trustee report available. The Moody’s Analytics CLO ESG tool does not include information on all applicable CLOs. As a result, the information contained in the Moody’s Analytics CLO ESG tool is incomplete and does not represent all relevant comparables.