Driving change is not always possible. The conventional wisdom regarding distressed credit investing is that the complex negotiations and fast pace of transactions at companies under duress thwart transitions toward sustainability and inclusion. Negotiating haircuts and covenants is already challenging, and the urgency of corporate distress amplifies the myriad difficulties of evaluating ESG, including inconsistency in defining and measuring ESG and lack of ESG data. The conventional wisdom is wrong: lenders and sponsors are increasingly incorporating ESG in investment decisions, and distressed investors can harness restructuring to drive sustainability and inclusion and with it long-term value creation.
