ESG-linked facilities sped from a concept with a handful of prototype deals in the wild 18 months ago to becoming an established and growing segment of the fund finance market today. Investor demand is the driving force, and sponsors are responding with ESG-oriented fund offerings. Value-aligned financing is a logical next step.

In the first installment of a two-part series, Private Equity Law Report traces the path of the ESG fund financing market from inception to the current framework for pricing and performance measurement, leaning on insights from Cadwalader’s Wes Misson along with other market participants. The article is recommended reading for those who have been following the market from a distance and for anyone newly getting up to speed.