KUALA LUMPUR: CIMB Bank has entered into a sustainability-linked derivative (SLD) transaction with Standard Chartered Malaysia in the form of an interest rate swap with a notional value of RM2.45bil for hedging purposes.
According to the joint statement on Wednesday, this landmark deal is the world’s first ringgit denominated SLD transaction and to date Asia’s largest environmental, social and governance (ESG) linked derivative transaction by notional value.
They said this was based on publicly available data and the latest data compiled by the International Swaps and Derivatives Association (ISDA) as at January 2021.
Importantly, this landmark SLD transaction has been structured to involve a pricing mechanism whereby a discount (cost reduction) or premium (penalty) will be applied depending on whether CIMB Group achieves pre-agreed sustainability performance targets (SPTs).
The ESG overlay of this instrument has been structured around two KPIs that reinforce recently announced sustainability commitments made by CIMB Group.
The two KPIs are the Group’s percentile ranking for banks based on the S&P Global Corporate Sustainability Assessment1
The statement said that in support of the group’s aspiration to be an industry leader on the Dow Jones Sustainability Index (DJSI), and reductions in Scope 1 and 2 greenhouse gas (GHG) emissions in line with the Group’s Net Zero ambitions.
The SPTs that have been set are material, ambitious, objective, measurable and verifiable byindependent sources.
Following this transaction, CIMB is keen to work with clients to execute more innovative treasury and derivative transactions with ESG-related pricing components or utilisation of proceeds, such as swaps, forwards and options involving cross currency, interest rate, commodity, or foreign exchange transactions.
CIMB said it has also been active in offering loan/financing products and bonds/sukuk that are sustainable or sustainability-linked.
Group CEO of CIMB Group Datuk Abdul Rahman Ahmad, said this landmark SLD transaction is a testament to the expertise of its treasury and markets team and “our group’s ambition to be an Asean sustainability leader by 2024”.
“This transaction demonstrates our very real commitment towards achieving our commitments to mobilise RM30bil in sustainable finance by 2024, achieve net zero scope 1 and 2 GHG emissions by 2030, and Net Zero GHG emissions by 2050, including financed emissions.
“As a financial intermediary, we play a critical role in channelling financing and capital in ways that will support a just transition towards a net zero economy and greater social equity. In collaboration
with our clients and partners, we look forward to introducing more innovative offerings such as this SLD in the sustainable finance space,” Abdul Rahman said.
The MD and CEO of Standard Chartered Malaysia Abrar A. Anwar, said “The attitude towards ESGissues have transformed significantly but many companies are still facing challenges when itcomes to incorporating sustainability.
“Despite their intention to transition to net zero by 2050, 67% of corporates have yet to take any action due to the lack of capital,” he said.
He added Standard Chartered was grateful for the opportunity to support CIMB with fulfilling their sustainability agenda as they collectively navigate net zero.
“Healing the world is a mammoth task, and this landmark deal shows how key collaboration is to making that happen. It isn’t just about helping clients; we’re looking inwards and making our own commitments.
“Standard Chartered is working towards reaching net zero carbon emissions from our financing by 2050, as part of our strategiccommitment to put the world on a sustainable path to a zero-carbon economy,” he said.