BlackRock bets its interest rate on ESG progress
Tying executive compensation to a company’s diversity goals is so 2020. In 2021, the way to advance environmental, social and governance (ESG) initiatives might be to tie them to lending costs.
Investment firm BlackRock has agreed to pay a higher or lower annual interest rate and commitment fee to a group of lenders on a $ 4.4 billion credit facility based on its improvement on indices specific ESG benchmarks, according to a Securities and Exchange Commission filing made public Tuesday.
More specifically, BlackRock aims to increase the proportion of black and Latin people it employs to 30% by 2024. The company also wants to increase the number of women in management positions by 3% each year. And it wants to quintuple – to $ 1 trillion by 2030 – its assets under management from sustainable investments.
So much so that the company incorporated these three parameters – but not by number – into a contract in exchange for access to emergency funding over five years. BlackRock also requested a $ 400 million increase in the value of the facility.
“The ESG linked credit facility reinforces BlackRock’s commitment and responsibility to achieve certain sustainability goals by incorporating a financial alignment component through our liquidity management strategy,” said a spokesperson for BlackRock. The Wall Street Journal.
Charlie Scharf, CEO of Wells Fargo turned heads last June when he said that efforts by members of the bank’s operating committee to increase representation and inclusion of various employees would be reflected in their year-end salaries. He then set out to double the number of black executives at the bank over the next five years.
BlackRock’s move extends accountability to the company’s bottom line – a notion Rich Fields, a partner at King & Spalding, said is spreading.
“More and more institutions have given more serious thought to financing for sustainable development over the past year,” he told The Wall Street Journal. “Borrowers and lenders are increasingly interested in demonstrating their commitment to ESG performance through their financing arrangements.”
The contract represents a doubling of BlackRock in its diversity and ESG efforts. The company, at the request of a stakeholder, has committed to conduct an independent audit – starting next year – to see how its operations may have contributed to racial inequalities in the financial system, Bloomberg reported on Monday.
Banks such as Citi, Goldman Sachs, Wells Fargo and Bank of America are asking their shareholders to vote against calls for such audits, saying they are tackling racial injustice in their own way. Like Wells, Goldman has set a number of goals for diverse hiring.
Citi and Bank of America pledged more than $ 1 billion each to tackle racial inequality. Last month, Citi reached the highest representation women on its board of directors among the world’s 20 largest banks. It was also the first major American bank to disclose raw data on the pay gap among its employees, according to gender.
JPMorgan Chase and Citi have called on regulators to block shareholder proposals demanding racial audits. These requests were denied, Bloomberg reported.
Morgan Stanley has agreed to undergo an internal diversity review of its employees and senior executives, and has held a meeting with shareholders ahead of next year’s annual meeting to ensure fairness for stakeholders not white, depending on the wire service.
State Street shareholders have also filed racial audit proposals. The bank has generally been a strong advocate for ESG progress – at least at the board level. State Street Global Advisors said in january he would start voting against board members of companies listed on the S&P 500 and FTSE 100 if those companies did not reveal the racial and ethnic makeup of their boards.