ESG – Lending Costs Tied to Internal Diversity, Equity and Inclusion Goals – a Coming Trend?

Mid week last week, Dawn Lim reported in the Wall Street Journal that BlackRock Inc. had cut a 5 year, $4.4 Billion dollar deal with its lending consortium that ties its lending costs on its credit facility to BlackRock’s ability to meet certain diversity, equity and inclusion goals (“DEI”).

The deal, as reported, ties its borrowing costs to meeting targets for women in senior leadership and to meeting numeric goals regarding Black and Latino employees within its work force. The stated goals for Black and Latino individuals as a percentage of its workforce are 30% of its workforce by 2024.  Their goal on women in senior management is to increase numerics by 3% each year through 2024.  

BlackRock also is focused on growing its environmental, social and governance assets under management from $200 Billion currently, to over $1 Trillion (with a “T”) by 2030.  The goals noted are focusing on aligning its own practices with that of the companies BlackRock invests in as CEO Larry Fink continues to push the envelope on ESG investing and increasing workforce DEI.  

The result of the credit facility loan covenants will seek to more closely align the company’s ESG investing goals with its internal corporate goals and impose costs on its asset managers via higher costs in its revolver by not achieving their stated goals.  

The Triple Bottom Line: A bit too early to call this evolution of tying lending costs to internal ESG goals as a trend (vs. a reaction to public scrutiny elsewhere), but in my view, it is a big step and a signals to the broader market that such self imposed costs can be achieved and that BlackRock is willing to take this type of risk, that align its investment decisions with its internal policies.  Big and bold steps indeed. 

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space.  We would be happy to discussion your proposed project with you.  Contact your Duane Morris attorney for more information.

If you have any questions about this post, please contact Brad A. Molotsky  (bamolotsky@duanemorris.com), Nanette Heide, Darrick Mix, Michael Schwamm, David Amerikaner or the attorney in the firm with whom you are regularly in contact.