Standard Chartered executes its first ESG-linked derivative

STANDARD Chartered announced on Tuesday that it has priced its first commodity hedge linked to environmental, social and governance (ESG) benchmarks with Trafigura, a leading commodity trading client.

The transaction involves combining conventional derivatives risk management with sustainability-linked key performance indicators (KPIs) that are linked to reducing greenhouse emissions and to sustainable sourcing in the base metals business, the London-based bank said.

Global head of financial markets sales at Standard Chartered, Sharad Desai, said: "We are committed to getting capital to where it is needed to help our clients achieve their sustainability goals, and ESG-linked derivatives are among a number of solutions that we offer them."

The transaction is structured to offer a premium or discount to Trafigura on its hedging rate based on fulfilling the pre-agreed ESG KPIs, Standard Chartered said. The KPIs are independently monitored and reported on regularly by a third-party provider, ERM Certification and Verification Services.