The private debt industry is increasingly focusing on ESG (Environmental, Social, and Governance) factors and net-zero targets in their financing agreements, as revealed by a recent survey. Of the 38 global respondents managing €341.3 billion in private debt assets, 70% already include ESG clauses in their agreements, with 23% considering it. Sustainability-linked loans offer incentives for borrowers to enhance their ESG performance, while some private debt managers engage with borrowers by providing pricing reductions for meeting ESG criteria.

However, concerning is the fact that only 25% of respondents include net-zero targets in their financing contracts, and 43% haven't even considered them, despite the global push for net-zero emissions by 2050. Some industry players, are integrating net-zero monitoring into their processes. The survey also highlights the emerging trend of private debt managers considering addendums related to ESG and net-zero for existing borrowers, with 29% contemplating such actions.

In summary, the private debt industry is recognizing the importance of ESG and net-zero commitments in financing agreements. While progress is being made, there is still room for more meaningful ESG targets and wider adoption of net-zero goals to align with global climate objectives.