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Sustainability Linked Credit

Accelerating the transition to net-zero emissions.

Sustainability Linked Credit

PaceZero is leading the way in the rapidly growing field of Sustainability Linked Loans (SLLs), focused on innovating and expanding the market. We invest in established businesses with ambitious sustainability objectives, supporting them on an economically responsible path towards net zero.

As the first sustainability focused private credit firm in North America, we are proud to be leaders in providing Sustainability Linked Loan structures to middle-market companies. Our focused approach allows us to provide borrowers with expertise, support, and access to a rapidly growing pool of sustainability focused capital.

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What Are Sustainability Linked Loans?

Sustainability-linked loans are liability based instruments that incentivize borrowers to achieve ambitious, predetermined sustainability performance objectives. A borrower’s performance is measured using predefined sustainability performance targets, as set against key performance indicators. These are used to determine qualification for a financial incentive, which can take several forms, such as an interest rate “ratchet” feature linking a portion of the interest rate to sustainability performance.

Unlike green loans and bonds, Sustainability Linked Loan proceeds can be used for general corporate purposes, allowing greater flexibility, while providing direct incentive for broader improvement of a borrower's overall sustainability profile. 

Investment Approach

We look to partner with great companies that have ambitious sustainability objectives. Our strategy focuses primarily on originating Sustainability Linked Loans for North American middle-market companies.  

PaceZero’s SLL framework adheres to Sustainability Linked Loan Principles (SLLP) and Guidance on the SLLP, published by the Loan Syndications and Trading Association, Loan Market Association, and Asia Pacific Loan Market Association, with representation from the International Capital Markets Association.

 

​PaceZero has the expertise, both in-house and through our preferred partners, to support companies in developing sustainability strategies and can provide assistance in implementing sustainability measurement, reporting and verification.

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Investment Criteria

PaceZero can invest in senior secured, unsecured, and subordinated loans, as well as, to a lesser extent, equity-related securities and warrants. We have the ability to lead or anchor sustainability linked debt financings across all industries, with a particular focus on working with borrowers in traditional industries with historically hard to abate emissions. We always seek to act as a transparent and reliable partner, providing flexible underwriting structures, rapid deployments, certainty, and deep expertise. 

Ownership

Sponsored & non-sponsored

stage

+2 year operating history

Revenue >$25mm

EBITDA positive

regions

Canada

United States

impact

Ambitious sustainability goals & strategy;

Net-zero aligned

Structures

3 to 7 year term loans with fixed or floating rate interest, and a coupon “ratchet” linked to sustainability performance

Covenants

Market based maintenance and incurrence covenants; Agreed upon sustainability performance indicators

Benefits of PaceZero Sustainability Linked Loans