As interest in environmental, social and governance (ESG) investing grows, PE market participants are seeking different ways to incorporate ESG principles and criteria into various aspects of fund formation and operation. One trend that has started to blossom in the U.S. involves attaching ESG targets to financing facilities for private funds, allowing sponsors and lenders to further their respective ESG goals while also affording sponsors rate discounts on their subscription credit facilities. To explore that development, the Private Equity Law Report spoke to lawyers who worked on two of the most prominent ESG-linked credit facilities in the U.S. to date. This first article in a two-part series describes the trend and delves into the characteristics of ESG-linked fund financing that differ from traditional fund financing, including the pricing benefits and use of ESG metrics. The second article will review the two most common approaches – performance-based and use-of-proceeds facilities – and the challenges that fund counsel may encounter when using them. See “The Convergence of ESG Regulatory Alignment and Corporate Responsibilities in the U.S. (Part One of Two)” (May 25, 2021).