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Private credit embracing ESG

Despite often being criticised as “woke” and anti-capitalist in the US, ESG, one of Wall Street’s most controversial labels, is quietly finding a foothold in the booming private credit market, according to a report by Bloomberg.

The report cites data from Preqin as revealing that, of the $156bn raised by private credit funds last year, about 16% targeted ESG goals, the highest share seen since at least 2014. And the trend shows no signs of slowing, with figures through June indicating continued growth.

The development comes at a time when green businesses are struggling to secure loans because they are often too new for venture capitalists, and too small for infrastructure investors.

Lombard Odier Investment Managers (LOIM) is among those seizing this opportunity by focussing on smaller green loans to mid-sized companies, and packaging them into portfolios for institutional investors. They Swiss firm’s flagship Sustainable Private Credit Fund, launched in July 2022 with support from the UK Environment Agency Pension Fund, aims to manage up to $500m with a net annual return target of about 12%.

“We prefer to step back from some of the more acrimonious debates and serve markets where value is being created,” said Rhys Marsh, portfolio manager at Lombard Odier. “The scale of the opportunity set ahead of us is enormous.”

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