In recent years, as ESG has risen up the corporate agenda, investment banks have shown rising interest in lending to credible ESG-linked debt facilities.

Formed in 2016, NatWest Markets is the investment-banking arm of NatWest Group, and like many of its competitors, it is seeking opportunities to increase its lending to ESG-linked investments.

In summer 2021, global investment firm Carlyle sought to secure a €2.3 billion ESG-linked credit facility for its European private equity and real estate platform, to support the firm’s 30 percent board diversity target, and to address climate change and achieve better ESG outcomes through training.

This call for credit provided an attractive opportunity for NatWest Markets to expand its sustainable finance lending. However, given the high level of market interest, NatWest Markets had to move quickly and work collaboratively in order to ensure it could capitalize on this opportunity.


NatWest Markets quickly connected with its peer Crédit Agricole Corporate Investment Bank and collaborated in order to establish itself as the lead arranger and facility agent with Crédit Agricole acting as ESG coordinator and agent.

Working with Credit Agricole, NatWest Markets was able to provide Carlyle with a line of credit structured as an umbrella facility, covering a few of Carlyle’s different European private equity funds. It is a three-year facility that Carlyle is expected to renew, for which the cost is linked to the correct fulfilment of set targets.

The established credit facility is linked to a diversity goal of achieving 30 percent board diversity across Carlyle’s majority-owned portfolio companies over the next three years. It is also linked to a goal aimed at tackling climate change by having more accurate and comprehensive measurements of greenhouse gas emissions across those same portfolio companies. Carlyle’s target is to get 100 percent of its majority-owned companies to disclose carbon emissions footprint data that is directly associated with their activities. The third target is focused on improving ESG outcomes through better governance by providing ESG-competent board training for all Carlyle board directors.

Meeting the KPIs will lead to a margin discount depending on the number of KPIs reached each year; the margin adjustment ratchets up proportionally. Not meeting any of the KPIs will mean there is no margin adjustment applied.


With support from Reed Smith’s funds finance team, the transaction concluded September 7, 2021 on an exceptionally compressed timeline.

The deal involved a large number of parties advising on diligence and security documents with counsel spanning England, Luxembourg, Scotland, the Cayman Islands, Germany, the United States and Canada.

With Reed Smith’s support, NatWest Markets established itself as the lead arranger and facility agent on Carlyle’s €2.3 billion ESG-linked credit facility, meaning it successfully capitalized on a significant opportunity to lend to a credible ESG-linked debt facility.

The Reed Smith team:

The Reed Smith team was led in London by partner and co-head of the firm’s funds finance team Leon Stephenson, supported by associates Chu Ting Ng, Natalie Sharkey, Sophie Devlin, Helen PenwillKyrstin StreeterCeline Collis and Nadia Macci, and sigma law specialist Pavle Jovic. Counsel Jim Lawlor and partner Ilene Froom worked on the U.S.-specific aspects of the transaction.

Comment from Kewsong Lee, CEO at Carlyle:

“For many years Carlyle has been driving significant progress on board diversity in our portfolio companies on a global basis, recognizing the correlation with strong financial decisions and performance. This European ESG-linked credit facility closely follows that of our Americas private equity platform. Together, they represent a significant moment in Carlyle’s strategy to reinforce our commitment to achieving greater diverse board-level representation.”

For further information, please visit our ESG capability page.