Driving sustainability in our Growth Credit Fund

As part of our commitment to transparency and continuous innovation in responsible investing, we spoke with Will Chappel, Managing Partner, Palatine Growth Credit and Maarten Odding CFO at StorMagic to explore the thinking behind Palatine’s ESG ratchet and its real-world impact on portfolio companies.

Will Chappel – Palatine

What made it important for Palatine to incorporate an ESG discount ratchet into the Growth Credit fund, and how does it align with Palatine’s broader ESG values?

Palatine sees investment as a force for good and strives for sustainable growth through supporting the delivery of positive outcomes in all our investments.  Over the last 15 years of applying our proprietary framework, we have observed how ESG builds resilient businesses, supports risk management and enhances or protects reputation. Alongside this, as a B Corp, it was critical to Palatine to apply this philosophy to the Growth Credit fund. We were mindful that we would not have the same influence over our Growth Credit investee companies as we do our PE companies, due to not holding Board Seats, therefore we created the ESG ratchet to incentivise our companies to take meaningful, impactful and long-lasting ESG action.  The ratchet is ‘unlocked’ when the company achieves one of the five agreed sustainability targets.  This is an important, yet pragmatic, approach to ESG stewardship in investments in support of, and encouraging the advancement of sustainability performance of investee companies resulting in positive outcomes.

How does the ESG ratchet differ from other growth credit products currently in the market?
The ESG ratchet is unique in the market, and we don’t believe there to be anything directly comparable among current growth credit products. Unlike the Sustainability-Linked Loans (SLLs) we’ve seen, which typically require ongoing, annual assessments and verifications – often resulting in a cost that outweighs the financial benefits – the ESG ratchet is based on a one-off, externally validated assessment. This approach significantly reduces the administrative and financial burden on companies, making the benefit of accessing the ratchet more impactful.

Another key differentiator is the flexibility of the ESG ratchet structure. It incorporates both environmental and social outcome targets, allowing companies to select a metric that aligns with their specific business strategy, core values, and stakeholder interests. This tailored approach supports meaningful ESG integration without compromising on commercial priorities.

How is the ESG ratchet perceived by the companies you work with?
Our clients have embraced the opportunity that comes with the ratchet. There has been strong engagement from across our client portfolio to learn more about what can be done to become a more sustainable business, and companies have used it as an opportunity to drive innovation. Alongside the ratchet itself, Palatine has had strong take up from the carbon literacy training that Palatine offers to its portfolio companies, which we have been very pleased to see.

Maarten Odding – StorMagic

What initially attracted Stormagic to the Palatine Credit Fund, and how did the ESG ratchet influence that decision?
We saw Palatine as a strong fit for Stormagic, not only because of its regional focus beyond London but also its genuine interest in our technology, which helped build a strong foundation of trust. The ESG ratchet added further value, serving as a positive incentive to strengthen our ESG policies in a way that aligns closely with our long-term vision as a company.

Could you tell us about the motivation behind your decision to set a science-based target (SBT)?
At StorMagic, one of our core purpose statements is that technology should be simple, scalable, and right-sized, setting us apart from overprovisioned solutions. We believe this philosophy should extend beyond our products to how we operate as a business. By setting a SBT, we not only stay true to our corporate vision but also strengthen alignment with customers and suppliers who value partnering with businesses that share their commitment to sustainability.

What value do you expect meeting your ESG target will bring to Stormagic in the long term?
In just the first year since gaining Science Based Target initiative (SBTi) approval, we’ve already seen tangible benefits, our SBT has featured in multiple RFP and RFI responses, particularly with enterprise customers where such commitments are increasingly expected. Looking ahead, we believe this value will only grow. As the effects of climate change become more evident and collective pressure to act intensifies, having clear ESG targets will strengthen our credibility, competitiveness, and long-term resilience.