This week Churchill’s Carol Loundon, managing director, underwriting and portfolio management, joins her colleagues Kelli Marti and Jessica Nels as we continue our special series for 2022 [link] with a discussion of ESG and private credit.

Increased focus on ESG in the past five years has mirrored the rise of private credit as an established asset class. This may not be a coincidence. The examination of environmental, social and governance factors as part of risk management has a long history in private credit given its illiquid nature. However, we are seeing more specificity and demand for detailed ESG information, putting additional responsibilities on both investors and managers.

Additionally, the size of the private market – at over $1 trillion rivaling both the broadly syndicated loan and high-yield bond markets – means more institutional investors are being introduced to privates. Investors looking to expand into private credit are also seeking similar transparency on ESG data.

Middle market borrowers lack the scale and sophistication of their large-cap counterparts, so the due diligence process requires specialized access. The good news is that experienced private credit owners and lenders are uniquely equipped to meet that need.