Larry Fink says BlackRock “isn’t perfect”. These new incentives could help

In the world largest asset manager may soon pay less to borrow money if it achieves its diversity goals and boosts its sustainable investments.

Black rock has for the first time linked the cost of tapping bank loans in three metrics: how many women hold leadership positions, employ blacks and Latinos, and how much it invests in assets that benefit society and the environment.

The interest rate and fees that BlackRock pays lenders on any amount it draws from its $ 4.4 billion primary credit facility will increase or decrease each year from 2022 based on the number of goals it achieves. The Wall Street Journal was the first to report the story.

BlackRock is targeting a 30% increase in the number of black and Latino employees in the United States by 2024, it said in a statement to CNN Business. It also aims to increase the percentage of women in leadership positions globally, currently 30%, by 3% per year.

In his annual letter to shareholders CEO Larry Fink admitted on Wednesday that the company culture was “not perfect”.

“Just as we ask other companies, we have a long-term strategy to improve diversity, equity and inclusion at BlackRock,” he said. Fink added that part of the strategy includes “mitigating bias” in its recruiting and talent management.

The company’s progress in increasing investments in companies with high environmental, social and governance (ESG) ratings could further affect its borrowing costs. He wants to manage sustainable assets worth $ 1 trillion by 2030, up from $ 200 billion today.

“The ESG-linked credit facility strengthens BlackRock’s commitment and responsibility to achieve certain sustainability goals,” the company said.

It will have to achieve at least two of its three goals and cannot “significantly underperform” the third for a tariff advantage to be felt, according to a spokesperson. “If BlackRock significantly underperforms on two of the three, a price penalty kicks in,” the spokesperson added.

The loan rate, which is a reserve facility not used regularly by the business, could also remain stable if it only narrowly misses its targets.

BlackRock’s commitment could give a boost to sustainability-related lending, which has grown in popularity in recent years as companies come under increasing pressure from shareholders to adopt better business practices for the company and the company. ‘environment.

Last year, Tesco, Britain’s largest supermarket group, tied interest payments on a £ 2.5bn ($ 3.5bn) revolving credit facility to environmental goals, including reducing emissions, using renewable energies and managing food waste.

BlackRock – which ended 2020 with nearly $ 8.7 trillion in assets – sharpened his concentration on ESG investing last year. It is committed to exiting assets that pose high sustainability risks, such as thermal coal, and has launched new products that filter fossil fuels and allow clients to invest in companies with the highest ESG ratings.

Earlier this year, BlackRock said it would ask companies to disclose plans on whether their business models are compatible with a “net zero economy” and that it would publish the proportion of its assets aligned with net gas emissions at greenhouse effect.

Fink reaffirmed that commitment on Wednesday and said the company aims for net zero emissions on all of its assets under management by 2050.

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