CIMB signs RM2.5b sustainability-linked derivative transaction with StanChart

It is the world’s 1st Malaysian ringgit denominated SLD transaction and Asia’s largest ESG-linked derivative transaction by notional value 


CIMB Bank Bhd has entered into a sustainability-linked derivative (SLD) transaction with Standard Chartered Bank Malaysia Bhd (StanChart) in the form of an interest rate swap with a notional value of RM2.45 billion for hedging purposes. 

In a statement yesterday the bank said based on publicly available data and the latest data compiled by the International Swap and Derivatives Association as of January 2021, this landmark deal is the world’s first Malaysian ringgit denominated SLD transaction and to date, Asia’s largest environmental, social and corporate governance (ESG)-linked derivative transaction by notional value. 

The 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. The ESG overlay of this instrument has been structured around two key performance indices (KPIs) that reinforce recently announced sustainability commitments made by CIMB Group Holdings Bhd. 

“The two KPIs are the group’s percentile ranking for banks based on the S&P Global Corporate Sustainability Assessment in support of the group’s aspiration to be an industry leader on the Dow Jones Sustainability Index, and reductions in Scope 1 and 2 greenhouse gas (GHG) emissions in line with the group’s net-zero ambitions,” CIMB said. 

“This transaction demonstrates our commitment towards achieving RM30 billion 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,” said CIMB Group CEO Datuk Abdul Rahman Ahmad (left). 

He further elaborated that as a financial intermediary, CIMB plays 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,” he added. 

StanChart MD and CEO Abrar A Anwar (right) said the attitude towards ESG issues has transformed significantly, but many companies are still facing challenges when it comes to incorporating sustainability. 

He emphasised that 67% of businesses have not integrated ESG factors into their operations, despite their intention to do so due to a lack of capital. 

StanChart will introduce new ESG products in Asia, including commodity, forex and credit derivatives. 

“We are grateful for the opportunity to support CIMB with fulfilling their sustainability agenda as we collectively navigate net-zero,” said Abrar. 

“To that effect, StanChart is working towards reaching net-zero carbon emissions from our financing by 2050, as part of our strategic commitment to put the world on a sustainable path to a zero-carbon economy,” he added. 

CIMB Group has steadily improved its position, moving from the 19th to the 65th percentile in 2017. 

Additionally, the group recently signed on to the Net-Zero Banking Alliance, which is a component of the Glasgow Financial Alliance for Net-Zero and the United Nations Race to Zero, a global initiative aimed at accelerating the transition to a zero-carbon economy.