Standard Chartered executes its first ESG-linked derivative

Standard Chartered has announced the pricing of the first commodity hedge associated with the benchmark ESG (Environment, Social and Governance) for top commodity trading client Trafigura.

Standard Chartered made the announcement via a press release issued in this regard on Tuesday.

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.

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, the release said.

CEO of Trafigura, Asia-Pacific Chin Hwee Tan 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."

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. We're proud to structure this first ESG-linked derivative transaction for Trafigura to help them execute both on risk management and sustainability targets."