Kerberos Capital Management has announced the introduction of a groundbreaking new direct lending product to law firms with a margin ratchet linked to ESG targets – the first debt product of its kind in Litigation Finance markets. The program is intended both to recognize and reward firms that have already established a commitment to advancing ESG factors in their work, and to incentivize qualifying firms to continue those efforts into the future.
To qualify for the program, firms must (A) demonstrate a material and ongoing commitment to providing pro bono legal services, (B) generate a threshold amount of revenue related to ESG-advancing case types, and (C) establish that they do not prosecute cases or otherwise conduct business in ways that run counter to ESG principles (a negative screener test). Key Performance Indicators related to each of these three primary qualifying factors will be assessed at the loan’s inception and monitored throughout the duration of the loan period, with downward margin adjustments ranging from 50 to 100 basis points.
“At some level, most plaintiff-side litigation can be thought of as advancing social interests, as it is through this work that individual rights are vindicated and accountability is imposed. In the same vein, litigation financing in general has ESG attributes, because the capital provides increased access to justice. But we wanted to go further,” said Joe Siprut, CEO & CIO of Kerberos. “Certain categories of cases warrant special acknowledgment for advancing ESG interests to a unique extent, and Kerberos’ new ESG product is intended to incentivize the prosecution of those cases. Building these incentives into our debt products will drive better ESG practices and outcomes.”