So far this year European PE has signed nine such loans worth $8.5bn, according to Dealogic.

ESG-linked sub-lines are definitely a “key theme to watch out for” in 2021, in the words of Christophe De Vusser, partner at global consultancy firm Bain & Co.

Today, European markets hold more than an 80% share of global sustainability-linked loan volumes, according to Bloomberg data. The activity has focused mostly on Spain, France and Italy.

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Bain & Co’s De Vusser says that Europe’s historical engagement in sustainability issues combined with stricter regulations explain why continental PE firms are ahead of the green finance curve compared with US firms.

The EU Taxonomy on Sustainable Finance, a landmark legal package aimed at channelling private capital into sustainable assets, will from December force asset managers in the EU to disclose their share of taxonomy-aligned assets under management. This will inevitably create an incentive to raise that share to remain competitive.

Additionally, “the industry has realised that it can make real money with ESG,” De Vusser adds. “This has become more than a compliance requirement. Firms will be sitting on solid companies that will do better with customers too, for example.”