The purpose of this collaboration is to solicit input from investors in leveraged finance including private debt, loans and high-yield bonds on corporate ESG disclosure.
Business case
A clear link has been established between ESG factors and credit quality, and therefore investment returns. Investors in leveraged finance currently gather information on ESG risk from several different sources, but the quality and availability of the information varies greatly from company to company. Credit rating agencies and ESG specialists provide increasingly detailed ESG research on listed companies based on publicly reported information. Smaller private companies however, do not face the same reporting requirements as public companies, and often lack the resources to publish consistent and comprehensive ESG metrics in a format that investors find useful.
The European Leveraged Finance Association (ELFA) believes that a coordinated approach to disclosure and analysis will facilitate an efficient flow of information to market participants and more effective engagement by investors with management. To this end, ELFA invites investors in private debt, loans and high-yield bonds to complete a survey to better understand their views on ESG disclosure, risk, and analysis. Following completion of the survey, ELFA will publish a second report summarising the findings of the survey as a resource for leveraged finance investors.