Sixth Street Specialty Lending, Inc. (TSLX): PESTLE Analysis [Nov-2025 Updated]

If you're tracking Sixth Street Specialty Lending, Inc. (TSLX), you know the Business Development Company (BDC) landscape in late 2025 is defintely not static. We are seeing a complex mix of tailwinds, like the new SEC co-investment relief and the FINRA exemption effective July 23, 2025, pushing deal flow, but also headwinds from expected Federal Reserve rate cuts that will pressure floating-rate Net Investment Income (NII). The good news is TSLX looks well-positioned; its Q3 2025 debt-to-equity ratio sits at a strong 1.1 times, plus its Net Asset Value (NAV) per share grew 1.2% while peers struggled. This PESTLE breakdown cuts through the noise to show you exactly where the political, economic, and technological shifts are creating both risk and opportunity for your investment thesis.

Sixth Street Specialty Lending, Inc. (TSLX) - PESTLE Analysis: Political factors

Supportive US policies favor domestic middle-market businesses.

You should know that the core political structure surrounding Business Development Companies (BDCs) like Sixth Street Specialty Lending is fundamentally supportive. The original mandate of a BDC, established by Congress in 1980, requires the company to invest at least 70% of its assets in private U.S. companies, which are often middle-market businesses. This structure makes TSLX a direct beneficiary of any protectionist U.S. policies designed to support domestic industries and job creation, a trend that is expected to mitigate broader economic issues in the BDC sector through 2025. Honestly, this policy alignment is a structural tailwind that helps keep the deal pipeline flowing.

Bipartisan political support for Business Development Companies (BDCs) remains strong.

The regulatory environment for BDCs is being actively shaped by a rare display of bipartisan consensus in 2025. A prime example is the 'Access to Small Business Investor Capital Act' (H.R. 2225), which passed the House of Representatives unanimously in June 2025. This legislation aims to fix a misleading U.S. Securities and Exchange Commission (SEC) disclosure rule that overstates the actual costs of investment in BDCs, specifically the acquired fund fees and expenses (AFFE) calculation. This commonsense fix removes an artificial hurdle to institutional investment, which directly expands the capital access for the small and mid-size American businesses that TSLX lends to.

Here's the quick math: encouraging stronger institutional investment means more capital flows into the BDC space, which lowers the cost of capital for middle-market borrowers, defintely a positive for TSLX's competitive position.

Uncertainty from the changing US administration could affect trade and tax policy.

The shift in the US administration following the 2024 election has introduced significant uncertainty, particularly around tax and trade policy, which impacts TSLX's portfolio companies. The biggest lever is the potential for comprehensive tax reform in 2025, as many individual and pass-through provisions of the Tax Cuts and Jobs Act (TCJA) are set to expire at the end of the year.

While the corporate tax rate of 21% is permanent, there is a strong political push to lower it further, perhaps to 15%. A 15% corporate tax rate would be a boon for S&P 500 earnings, potentially boosting them by 5 percentage points in 2026, which would also benefit TSLX's portfolio companies by increasing their cash flow and debt service capacity. The other major risk is trade policy. The new administration has discussed implementing a reciprocal-tariff regime and has already announced plans to impose a 25% tariff on steel and aluminum imports from all countries. This could raise costs and create supply chain volatility for some of TSLX's borrowers.

Geopolitical risks create volatility in the credit markets, impacting deal flow.

Geopolitical instability is no longer a fringe issue; it's a primary driver of market volatility in 2025. A June 2025 survey of institutional investors found that a massive 88% flagged geopolitics as a significant risk to returns over the next two to three years. This uncertainty, driven by trade tensions and regional conflicts, has a direct impact on deal flow and credit spreads.

The good news for TSLX is that this environment is actually pushing institutional capital toward more defensive strategies like private credit. When the public markets get jumpy, private debt often looks more attractive. Still, M&A activity is being re-evaluated by company boards due to these geopolitical risks, which can slow down the volume of new leveraged buyout (LBO) deals that BDCs rely on.

• Geopolitical factors are a top concern for clients considering investment strategies.
• Increased focus on geopolitical factors during portfolio construction by 44% of institutional investors.
• Volatility encourages investors to emphasize resilience and diversification.

TSLX's strategy of focusing on non-sponsored or 'Lane 2' transactions-uniquely sourced opportunities-helps to mitigate the effect of muted M&A activity in the broader market. This thematic sourcing is how they provided total commitments of $388 million and total fundings of $352 million in Q3 2025, even with elevated competition.

Next Step: Portfolio Management should model the impact of a 15% corporate tax rate scenario versus a 4-ppt tariff increase scenario on the top five portfolio company EBITDA-to-Interest coverage ratios by the end of the quarter.

Sixth Street Specialty Lending, Inc. (TSLX) - PESTLE Analysis: Economic factors

Federal Reserve rate cuts are expected, pressuring floating-rate Net Investment Income (NII).

You need to understand that the Federal Reserve's move to cut rates is a double-edged sword for a Business Development Company (BDC) like Sixth Street Specialty Lending, Inc. (TSLX). The company's portfolio is highly sensitive, with 96.3% of its debt investments at floating rates. This structure allowed for significant Net Investment Income (NII) growth during the hiking cycle, but the tide is turning.

The Fed cut rates by 0.25% in September 2025, setting the new target federal funds rate at 4.0% to 4.25%. This is the start of a trend. For Q3 2025, TSLX reported adjusted NII per share of $0.53. The weighted average total yield on debt already saw a modest decline to 11.7% from 12.0% in Q2 2025, primarily reflecting lower base rate resets and the payoff of higher-yielding assets. The good news is TSLX has a fully floating-rate liability structure, which helps mitigate the NII decline compared to peers with fixed-rate debt.

Here's the quick math: lower base rates mean lower interest income on your assets, but also lower interest expense on your debt. Still, the NII pressure is real. Management expects full-year 2025 adjusted NII per share to land at the top end of the previously stated range of $1.97 to $2.14.

Market competition is tight, leading to pressure on loan spreads.

The private credit market is seeing intense competition, and that is defintely squeezing loan spreads (the profit margin on a loan). This pressure is evident in the elevated repayment activity, which is a key near-term risk. In Q3 2025, 75% of TSLX's repayments were driven by borrowers refinancing their debt at lower spreads in the broader loan markets. These refinanced deals had spreads ranging from 325 to 525 basis points (bps).

TSLX has successfully navigated this by focusing on differentiated, thematic deals. The weighted average spread on their new floating-rate investments in Q3 2025 was a strong 700 bps. This compares very favorably to the Q2 public BDC peer average of 549 bps on new issue first lien loans. This discipline is a clear differentiator.

To be fair, the sector-wide trend is concerning. As of Q2 2025, 59% of BDC peer portfolios (by count) had spreads below 550 bps, a percentage TSLX expects to increase further. TSLX, by contrast, has only 12% of its portfolio (by fair value) below that 550 bps contractual spread threshold.

M&A and leveraged buyout (LBO) activity is expected to expand due to lower financing costs.

A lower cost of capital, driven by the Federal Reserve's rate cuts, is the catalyst the mergers and acquisitions (M&A) and leveraged buyout (LBO) markets have been waiting for. Lower financing costs make deals more accretive (immediately profitable). Wall Street analysts are forecasting a significant rebound in event-driven activity after a three-year lull.

For 2025, Bank of America Securities projects a 23% rise in event-driven M&A activity. Morgan Stanley is even more bullish, expecting acquisition volume to jump to $225 billion. TSLX is already capitalizing on this, as evidenced by its involvement in a major retail buyout, including a $2.5 billion term loan for Walgreens in Q3. This is a clear opportunity for BDCs with deep sourcing capabilities.

However, TSLX management remains a trend-aware realist, noting they do not foresee a broad-based recovery in M&A activity in the near term, expecting spreads to remain tight as capital supply outpaces demand.

TSLX maintained a solid Q3 2025 debt-to-equity ratio of 1.1 times, signaling balance sheet strength.

A strong balance sheet is your foundation in a volatile economic environment. TSLX's financial leverage remains conservative and well within the regulatory limits for BDCs. For Q3 2025, the average debt-to-equity ratio was a solid 1.1x. This is down from 1.2x in the prior quarter, which is a positive sign of disciplined capital management.

This conservative leverage ratio provides ample flexibility to pursue new, high-quality investment opportunities as the M&A market picks up, without taking on undue risk. Total investments stood at $3.4 billion at quarter-end.

Credit deterioration risk is rising, pointing to potential upticks in non-accruals.

While the overall economy is resilient, the prolonged period of higher interest rates before the recent cuts has stressed highly leveraged companies. This points to a rising, though still contained, risk of credit deterioration across the direct lending sector. For TSLX, the credit quality remains remarkably strong, which is a testament to their underwriting standards.

As of Q3 2025, TSLX had only two portfolio companies on non-accrual status, representing a mere 0.6% of the portfolio by fair value. This figure showed no change from the prior quarter. This is a very low non-accrual rate compared to the broader BDC sector. The expectation of lower future interest rates should actually help improve the credit quality of portfolio companies by reducing their interest expense burden, which could lower default risk.

The key risk to watch is the cohort of companies that must refinance their debt in the coming years. If you're not careful, non-accruals can spike fast.

• Monitor the 0.6% non-accrual rate closely.
• Expect lower interest rates to improve borrower interest coverage.
• Maintain robust credit and risk controls to mitigate sector-wide pressures.

Sixth Street Specialty Lending, Inc. (TSLX) - PESTLE Analysis: Social factors

Strong investor demand for high-yield income keeps BDCs attractive

You're looking for yield in a market where traditional fixed income is defintely not cutting it, and that social demand for high-yield income is a massive tailwind for Business Development Companies (BDCs) like Sixth Street Specialty Lending, Inc. (TSLX). The core social factor here is the persistent need for income-generating assets among individual and institutional investors.

TSLX's attractive dividend yield is a direct reflection of this demand. As of November 9, 2025, the forward dividend yield stood at approximately 8.70%. This strong yield, combined with a track record of dividend payments, drives investor confidence. We see this confidence play out in the valuation: TSLX traded at a P/NAV (Price-to-Net Asset Value) of around 1.38x in Q1 2025, which is a significant premium and makes it one of the most expensive BDCs in the sector. That premium signals sustained, high investor appetite for TSLX's specific risk-return profile.

Here's the quick math on their recent performance, which fuels that investor demand:

• Annualized Return on Equity (ROE) from Net Income (Q2 2025): 14.7%
• Net Asset Value (NAV) per Share (Q3 2025): $17.14
• Base Dividend Declared (Q4 2025): $0.46 per share

A high-yield BDC is a social necessity for many retirement portfolios right now. That's the simple truth.

The retreat of traditional banks creates a larger financing gap for middle-market companies

The post-2008 regulatory environment, plus a general tightening of credit standards, has caused a significant social and economic shift: traditional banks are pulling back from middle-market lending. This retreat creates a massive financing gap, which specialty finance companies like TSLX are perfectly positioned to fill. This is a structural opportunity, not a cyclical one.

The numbers show a clear trend toward non-bank lenders dominating the landscape. Private credit's market share in middle-market lending is projected to reach 40% by the end of 2025, a doubling from 20% in 2018. Specifically, non-bank lenders financed an estimated 85% of U.S. leveraged buyouts in 2024, up sharply from 64% in 2019. This is a permanent market shift.

In the first quarter of 2025, the caution was palpable: a survey showed that 92% of banks reported not lending as much as they desired, confirming tighter standards across Commercial & Industrial (C&I) loans. TSLX, as a direct lender, benefits from this bank retrenchment by providing certainty of execution for acquisitions, which is highly valued by private equity sponsors.

Private credit has become the default financing source for middle-market deals. Over 70% of mid-market transactions were financed by private credit during recent periods of market turmoil, including early 2025.

Portfolio companies are facing labor market shifts and remote/hybrid work model costs

TSLX's portfolio companies-the middle-market firms they lend to-are navigating a profound social change in the labor market: the normalization of flexible work. This shift introduces both cost efficiencies and new operational challenges that directly impact a borrower's credit quality. You have to watch how your borrowers manage this.

As of Q3 2025, the U.S. labor market data shows the scale of the shift:

The preference is clear: 70% of job seekers include hybrid work in their preferred options. For TSLX's borrowers, this means they must offer flexibility to compete for talent, particularly in high-skill areas like Technology (where 29% of Q3 2025 postings were hybrid) or Finance and Accounting (26% hybrid). While remote work can expand the talent pool, it also introduces costs-like managing IT infrastructure for a dispersed workforce or the emerging cost of reduced collaboration and mentoring for less-experienced staff. This is a critical factor in assessing the long-term operational stability and efficiency of TSLX's debt investments.

TSLX's Net Asset Value (NAV) per share grew 1.2% over a period where the peer average declined 10.1%

This is the ultimate social proof of TSLX's underwriting discipline and portfolio quality, which is a major factor in its premium valuation. When you compare TSLX's performance against the broader public BDC sector, their ability to preserve capital stands out dramatically. It shows their disciplined investment approach is working, even during periods of market stress.

Here's the quick comparison over the period from the fourth quarter of 2021 through the first quarter of 2025, extended to Q2 2025:

• Average Public BDC NAV per share: Declined by 10.1%
• Sixth Street Specialty Lending, Inc. NAV per share: Increased by 1.2% (through Q1 2025) or 2% (through Q2 2025)

This outperformance is not a fluke. It's the result of their focus on senior secured investments, which represented 92.4% of their portfolio as of June 30, 2025. Their non-accrual investments-loans that have stopped paying interest-were exceptionally low at only 0.6% of the portfolio at fair value in Q2 2025, down from 1.2% in the prior quarter. That's a testament to their conservative underwriting, and it's why investors pay a premium.

Sixth Street Specialty Lending, Inc. (TSLX) - PESTLE Analysis: Technological factors

Widespread adoption of Artificial Intelligence (AI) for underwriting and predictive analytics is critical.

You're operating in a direct lending market where speed and precision are no longer optional, but table stakes. The widespread adoption of Artificial Intelligence (AI) in underwriting is rapidly changing how credit risk is assessed, and Sixth Street Specialty Lending, Inc. (TSLX) must not just keep pace, but lead. Industry-wide, AI-driven risk assessment tools have already reduced underwriting times by approximately 35% in 2025, which translates directly into faster deal closing and better capital deployment.

For TSLX, this means leveraging AI to maintain its disciplined underwriting edge. While the company's core strategy relies on human expertise and the broader Sixth Street platform, AI is the engine that processes the massive data sets required to find the best opportunities. Predictive analytics, for example, helped lenders improve portfolio returns by roughly 1.5 percentage points in 2025 by better identifying higher-yield, lower-risk opportunities. That's a material gain that cannot be ignored.

Here's the quick math: TSLX reported a strong annualized return on equity for net investment income of 12.5% through Q3 2025. A 1.5 pp lift from superior predictive modeling would push that figure even higher, defintely separating TSLX from its peers. The entire AI in lending market is expected to reach $11.63 billion in 2025, so this isn't a niche trend; it's the new infrastructure for credit.

AI disruption could make some portfolio company business models obsolete, raising credit risk.

The very technology that helps TSLX underwrite loans faster also poses a significant credit risk to its portfolio companies. TSLX's strategy involves lending to middle-market companies, including those in the technology sector, such as cybersecurity firm ReliaQuest. If a borrower's business model is suddenly made obsolete by a generative AI competitor, the collateral value of their debt plummets, and TSLX faces a non-accrual event.

To be fair, TSLX has a very low non-accrual rate-just 0.6% of the portfolio by fair value as of Q3 2025-but that number can turn quickly if a key sector faces a technological cliff. The risk is concentrated in the speed of disruption. An AI model can erode a traditional software company's competitive moat in months, not years, unlike previous technology cycles. This requires TSLX's investment team to integrate a deep, forward-looking AI obsolescence analysis into their diligence process for every single loan.

• Action: Mandate a quarterly 'AI Obsolescence Review' for the top 20% of the portfolio by fair value.
• Risk: Sudden, rapid decline in a borrower's revenue due to a new, AI-native competitor.
• Opportunity: Finance the AI-native companies to capture the high-growth segment.

TSLX must invest heavily in cybersecurity, moving toward zero-trust models.

As a financial institution managing a portfolio of approximately $3.3 billion (as of mid-2025) and sensitive client data, TSLX is a prime target for cyberattacks. The cost of cybercrime is expected to reach $10.5 trillion annually by 2025 globally, so the threat is enormous. This isn't just about protecting TSLX's own data; it's about protecting the entire Sixth Street platform and its due diligence processes.

The industry is shifting its defense strategy. The traditional perimeter-based security model is dead; the new standard is zero-trust architecture (ZTA), which requires continuous verification of every user and device, regardless of location. This is a heavy lift, but it's a necessary investment to protect the firm's reputation and capital. Nearly 78% of organizations are planning to increase their cyber budget over the next 12 months, with investment in AI being the top priority at 36% of budget allocations. TSLX must align its spending with this trend.

What this estimate hides is the cost of a breach, which for large firms can easily exceed $1 million. A single, major breach would wipe out a significant portion of the Q3 2025 Net Investment Income of $0.54 per share.

Leveraging data-enabled capabilities is key to TSLX's differentiated thematic sourcing strategy.

TSLX has consistently emphasized its differentiated thematic sourcing strategy, which is how it finds high-quality deals in a competitive market. This strategy relies entirely on superior data analysis-finding market dislocations or industry trends before competitors do. The ability to process vast, unstructured data sets and identify patterns is where technology, particularly Generative AI, becomes a powerful competitive advantage.

This data-enabled capability is why TSLX was able to command a weighted average spread on new floating rate investments of 700 basis points in Q3 2025, which is significantly higher than the peer average. This spread premium is the direct financial benefit of their technology-backed sourcing and disciplined underwriting. The technology allows the firm to identify companies with a weighted average revenue of $376 million and EBITDA of $113 million in the core portfolio, ensuring they are lending to robust middle-market players.

The table below summarizes the key technological factors driving TSLX's competitive position in 2025:

Sixth Street Specialty Lending, Inc. (TSLX) - PESTLE Analysis: Legal factors

You're looking at Sixth Street Specialty Lending, Inc. (TSLX) and trying to map out the legal landscape, which is smart because BDCs (Business Development Companies) operate under a specific, tight regulatory framework. The key takeaway is that 2025 has brought significant regulatory modernization, reducing administrative friction and opening new avenues for capital deployment, but the core mandate remains a strict constraint.

FINRA exemption from IPO purchase rules (5130/5131) became effective July 23, 2025

This is a subtle but important change. On July 23, 2025, the Financial Industry Regulatory Authority (FINRA) adopted amendments that exempt BDCs from Rule 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings) and Rule 5131(b) (Spinning). TSLX, as a publicly traded BDC, already had an exemption, but this change levels the playing field for the entire sector, including non-traded and private BDCs.

The old rules were designed to prevent insiders from profiting unfairly on IPOs, but they created a huge administrative headache for BDCs trying to prove their investors weren't 'restricted persons'. Now, the categorical exemption simplifies compliance, which means less time spent on paperwork and more flexibility for BDC managers to diversify their portfolios with new issues when they see a good opportunity. It's a clear win for operational efficiency across the industry.

SEC's simplified co-investment relief allows for larger, more diversified transactions

The ability to co-invest with affiliated funds is crucial for a firm like TSLX, which is part of the larger Sixth Street platform. The SEC's move to grant a simplified form of co-investment exemptive relief, with the first order granted on April 29, 2025, is a major modernization. This new relief shifts the focus from rigid, detailed transaction-by-transaction conditions to a more principles-based framework.

What this really means is a reduction in the administrative burden on the Board of Directors, as they no longer need to pre-approve every single follow-on investment or disposition unless an affiliate already has a pre-existing interest. This streamlined process allows TSLX to participate more flexibly and quickly alongside its private fund affiliates in larger, more complex transactions, which can lead to better deal flow and greater diversification across the investment portfolio. It's a direct enabler of larger-scale capital deployment.

TSLX must adhere to the BDC mandate of investing at least 70% of assets in non-public US companies

This is the foundational legal constraint for any BDC: the Investment Company Act of 1940 requires that at least 70% of a BDC's total assets must be invested in 'qualifying assets,' primarily securities of non-public U.S. companies. TSLX has consistently managed its portfolio to maintain a healthy buffer above this minimum, which is a key measure of regulatory compliance and investment discipline.

Here's the quick math based on the latest 2025 data:

As of March 31, 2025, TSLX's qualifying assets stood at 83.4% of total assets. That 13.4 percentage point buffer (83.4% minus 70%) gives management plenty of room to maneuver and invest in non-qualifying assets, like publicly traded debt or CLO equity, to optimize returns without risking the BDC status. What this estimate hides is that the portfolio composition is constantly shifting, so continuous monitoring is defintely required.

Ongoing industry efforts seek further regulatory relief for multiple share classes

While TSLX is a publicly traded BDC, the broader industry trend of multi-share class relief is a significant legal development that impacts the competitive landscape. In March and April 2025, the SEC granted exemptive relief for multiple share classes to private BDCs.

This relief allows private BDCs to offer different share classes with varying sales loads and distribution fees, which makes it easier for them to tap into different distribution channels, like registered investment advisors and broker-dealers.

• Expands capital-raising options for competitors.
• Allows customized fee structures for specific investor types.
• Brings private BDCs closer to distribution parity with other retail vehicles.

For TSLX, this means the competition for private credit capital is getting fiercer, as non-traded private BDCs gain more operational flexibility to raise capital from high-net-worth investors. You need to be aware that this regulatory easing for private funds could accelerate the shift of capital towards the private BDC space, forcing public BDCs to innovate to maintain their premium valuations.

Next step: Investment team to model the capital deployment velocity of key private BDC competitors under the new co-investment and multi-share class rules by month-end.

Sixth Street Specialty Lending, Inc. (TSLX) - PESTLE Analysis: Environmental factors

Integration of Environmental, Social, and Governance (ESG) factors is now a core investment consideration

You've probably noticed that ESG (Environmental, Social, and Governance) isn't just a compliance buzzword anymore; it's a fundamental risk and value driver, especially for a direct lender like Sixth Street Specialty Lending, Inc. (TSLX). The firm's manager, Sixth Street, explicitly states that evaluating relevant sustainability factors is key to maximizing risk-adjusted returns. They view this assessment as a way to judge the durability of an investment theme or a middle-market business.

The market is defintely pushing this shift. As of March 31, 2025, a significant 88% of global individual investors reported interest in sustainable investing, proving this isn't a niche trend. For TSLX, with a portfolio fair value of approximately $3,376.3 million invested across 108 portfolio companies as of September 30, 2025, this focus must be deeply embedded in the underwriting process. It's about protecting capital, not just being green.

Growing pressure from investors and regulators to adopt sustainable business practices

The pressure on Business Development Companies (BDCs) like TSLX to formalize sustainable practices is coming from two directions: capital providers and global regulators. On the investor side, private capital Limited Partners-especially those in Europe-are increasingly demanding comprehensive ESG due diligence on portfolio companies. If you want access to the deepest pools of institutional capital, you have to show your work.

On the regulatory front, while the U.S. landscape remains politically charged, global standards are tightening, creating risk for TSLX's portfolio companies that operate internationally or in global supply chains. For example, the EU's Corporate Sustainability Reporting Directive (CSRD) requires many multinational companies to report their 2025 data starting in January 2026. Plus, the EU Deforestation Regulation (EUDR) is set to take effect for large companies by December 30, 2025, impacting supply chains for commodities like wood and soy, which could affect some of TSLX's industrial or consumer-facing borrowers.

TSLX's due diligence must increasingly vet portfolio companies' carbon footprints and green initiatives

TSLX's due diligence process must move beyond simple policy checks to quantifiable environmental metrics. Sixth Street's policy is to factor in the potential impact of sustainability issues on profitability and performance during underwriting. This is where the rubber meets the road: you need data to prove a company's durability.

The private credit industry as a whole is seeing a massive surge in data collection. A recent industry report noted that the number of ESG-aligned data points collected increased by 45% in 2023 over the prior year, exceeding 150,000 data points. TSLX must align its due diligence to capture specific environmental data from its 108 portfolio companies, focusing on material issues like energy efficiency and waste reduction.

Here's the quick math: a portfolio company with a high carbon intensity faces higher future operating costs and potential stranded assets. That's a credit risk.

Failure to comply with emerging sustainability standards could limit access to certain capital pools

For a BDC, access to diverse and low-cost capital is paramount. Failure to meet the environmental standards increasingly demanded by institutional investors and sovereign wealth funds can directly limit TSLX's ability to raise capital or refinance debt at favorable rates. This is a clear financial headwind.

The investor community is using ESG performance as a screening tool. Companies that proactively align with the emerging global standards-even if not legally required in the U.S. today-will gain a competitive advantage in securing capital from sustainability-conscious investors. Conversely, a portfolio with a high concentration of environmentally-risky assets could face a higher cost of capital or even exclusion from certain investment mandates.

The risk is that TSLX's Net Asset Value (NAV), which was $17.17 per share in Q2 2025, could face downward pressure if the market begins to price in the unmanaged environmental risks of its underlying investments.

• Embed climate risk into the credit rating model.
• Require top 20% of portfolio companies by exposure to report a material environmental metric.
• Finance: draft a report detailing the potential impact of a 10% carbon tax on the top five industrial portfolio companies by Q1 2026.