BlackRock, the world’s largest asset manager, has amended a $4.4 billion credit facility, linking its performance on key sustainability metrics to the interest the company pays on the debt.
Sustainability linked securities and financings are an emerging form of sustainable finance instruments, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. The instruments have been gaining significant popularity by issuers and investors.
In BlackRock’s case, the interest rate and commitment fee on its $4.4 billion credit facility is tied to three sustainability key performance indicators (KPIs), including the company’s Black, African American, Hispanic and Latino Employment Rate, its Female Leadership Rate, and its Sustainable Investing AUM Amount.
The KPIs align with several of BlackRock’s existing sustainability goals, including initiatives to increase the percentage of female senior leaders by 3% growth per annum, increase representation of Black and LatinX US employees by 30% by 2024, and grow sustainable investment AUM to $1 trillion by 2030.
According to the new terms of the credit facility, if BlackRock achieves 2 of its 3 KPI objectives, while not meaningfully underperforming on the third KPI, a pricing benefit linked to the facility commitment fee and interest rate on any draw amounts will kick in, while if the company meaningfully underperforms on 2 of 3 KPIs, a pricing penalty kicks in.
In an email to ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Today, a BlackRock representative said:
“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.”
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