The private equity firm Carlyle Group plans to announce on Wednesday a $4.1 billion credit line for its portfolio companies that will tie the price of debt to the diversity of a company’s board, the DealBook newsletter reports.
Carlyle did not disclose the rates associated with the loans. To help companies increase diversity hiring, it will tap its database of executives along with those of partners like Catalyst and the Latino Corporate Directors Association.
The three-year facility, which the firm says is the largest of its kind in the United States, is part of an “integrated approach to building better businesses,” said Carlyle’s chief executive, Kewsong Lee.
The effort to use the tools of private equity to promote diversity initiatives is part of a broader trend in so-called environmental, social and governance investments as they shift to private capital from the equity markets. Debt issuance in sustainability efforts hit a record $732 billion 2020, up 26 percent from the prior year.
The credit facility is an extension of Carlyle’s goal for the boards of the companies in its portfolio to have a diversity rate of at least 30 percent by next year. Nearly 90 percent of its companies now meet its 2016 goal of having at least one director who is a woman or ethnic minority for companies in the United States or, for companies outside the United States, one director who is a woman.
The firm says the effort is good for business: In a study of its portfolio companies, Carlyle found that firms with two or more diverse board members recorded annual earnings growth 12 percent higher than those with fewer diverse directors.
Carlyle has arranged more than $6 billion in financing linked to its E.S.G. goals, including loans for the packaging firm Logoplaste tied to reducing its emissions; the denim manufacturer Jeanologia, linked to water savings; and the gearbox maker Flender, based on renewable power capacity. The firm estimates that it has saved more than $15 million from those deals.
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