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Standard Chartered executes its first ESG-linked derivative

First commodity-linked derivative to ESG performance of Trafigura

May 05, 2021 00:00:00

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 - from owned or controlled sources - and to sustainable sourcing in the base metals business, said a statement.

This transaction is structured to offer a premium or discount to Trafigura on their hedging rate based on fulfilling the pre-agreed ESG KPIs, which are independently monitored and reported on regular basis by a leading third-party provider, ERM Certification and Verification Services.

Chin Hwee Tan, CEO of Trafigura, Asia-Pacific, said: "We are committed to embed sustainability in our day-to-day operations in a consistent and coherent way. A key pillar of our responsible business practices involves minimising adverse impacts on the natural environment.

This sustainability goals-linked derivative transaction with Standard Chartered is an important step forward on our journey."

Sharad Desai, Global Head of Financial Markets Sales at Standard Chartered, 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. We're proud to structure this first ESG-linked derivative transaction for Trafigura to help them execute both on risk management and sustainability targets."

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