By Dawn Lim
Investment giant BlackRock Inc. will need to hit its staff-diversity targets and other sustainable-business goals to keep its corporate borrowing costs down.
The firm struck a financing deal with a group of banks that links its lending costs for a $4.4 billion credit facility to its ability to achieve certain goals, like meeting targets for women in senior leadership and Black and Latino employees in its workforce.
The firm plans to boost the share of Black and Latino people in its U.S. workforce 30% by 2024, a spokesman said. It aims to increase the share of women in its senior leadership ranks by 3% each year.
BlackRock's progress on growing assets in funds focused on companies with high environmental, social and governance ratings will also impact its lending costs. The firm aims to grow the roughly $200 billion it manages in so-called sustainable strategies to $1 trillion by 2030.
Depending on the number of targets it meets or falls short of, BlackRock's lending costs could rise or fall.
BlackRock is participating in a novel experiment in the financing world. More companies are testing out financing arrangements that encourage borrowers to meet environmental or sustainability goals. Such loans are usually structured to cost borrowers more if they fail to achieve their goals.
The loan is a five-year credit facility that gives BlackRock a ready pool to draw on in emergencies. The clauses were among other changes BlackRock negotiated recently with its banks that included a $400 million increase to the size of the facility. The credit arrangement was disclosed in a regulatory filing this week.
"More institutions have been thinking of sustainability-linked finance more seriously in the last year," said Rich Fields, a partner at law firm King & Spalding who focuses on corporate governance issues. "There's growing interest among borrowers and lenders in demonstrating commitment to ESG performance through their financing arrangements."
BlackRock is best known for its sprawling lineup of funds that trade rapidly and track indexes. The firm and its CEO, Larry Fink, have pushed companies its funds invest in to be more attentive to environmental and social risks--and to increase workforce diversity.
BlackRock's internal policies and culture have been in the spotlight in recent weeks. After articles and blogs featured former employees' complaints of an exclusionary workplace, BlackRock said recently that it was establishing a new investigations team to handle workplace complaints and hired a law firm to conduct an internal review.
In response to shareholder pressure, the firm also recently said it plans to audit its strategy to improve diversity at the firm and cater to the broadest scope of customers.
Going forward, the new lending facility will impose a cost on the asset manager for missing its workplace-improvement and other goals.
"The ESG-linked credit facility enhances BlackRock's commitment and accountability to achieving certain sustainability goals by integrating a component of financial alignment through our liquidity management strategy," a BlackRock spokesman said.
Write to Dawn Lim at firstname.lastname@example.org
(END) Dow Jones Newswires