Carlyle launches new loan program to incentivize greenhouse gas cuts

Carlyle Global Credit has launched a lending program that incentivizes borrowers to cut greenhouse gas emissions and meet climate goals.

Carlyle called the “decarbonization-linked financing program” one of the first such initiatives in U.S. private credit. Borrowers can lower interest costs by meeting prescribed targets. Further details were unavailable.

“Through the program, Carlyle offers a pricing benefit tied to a borrower’s achievement of decarbonization targets or other tailored climate-related KPIs,” according to a company statement today. "Carlyle and participating borrowers will work closely together to assess and monitor appropriate KPIs, while Carlyle’s dedicated ESG team will provide on-going support and expertise to assist borrowers in achieving climate-related goals."

Carlyle believes the effort “may result in significant carbon emissions reductions within our portfolio over time.”

“This innovative decarbonization-linked financing program provides another avenue for Carlyle to support its investment portfolios in a changing world, and drive meaningful action on the transition to a lower carbon future,” said Megan Starr, Carlyle’s Global Head of Impact, in the statement. “As a non-controlling asset class, credit naturally has lagged private equity’s ability to collect ESG data and incentivize ESG improvements. This new approach addresses both challenges.”

At the same time, Carlyle said it closed two deals with “decarbonization-linked terms”:

• Fairway Lawns — Carlyle Global Credit was sole administrative agent, bookrunner and arranger on the financing. Morgan Stanley Capital Partners acquired the business. The company provides residential lawncare services in the Southeast U.S.
• The Carlstar Group — Carlyle was lead investor and administrative agent on debt facilities backing a refinancing. The business has been an investment of American Industrial Partners since 2013. The company sells specialty tires and wheels.