Deutsche Bank and Olam International have executed what is believed to be Asia’s first FX derivative linked to environmental, social and governance (ESG) key performance indicators (KPIs).

The ESG-trade was a one year USD/Thai Baht forward enables Olam to lock-in a discount when it meets pre-defined ESG targets which supports the United Nations (UN) Sustainable Development Goals (SDGs). The FX risk solution marries the requirement to hedge the FX risk arising from growing a crop in one country and selling it to another country, and supports Olam’s program to strengthen supply chain sustainability.

“Supporting our clients’ transformation towards sustainability is a key plank in Deutsche Bank’s strategy,” says Deutsche Bank head of fixed income and currencies and Corporate Bank APAC and chief country officer, Singapore, David Lynne. “Deutsche Bank aims to lead the industry by creating innovative ESG financial solutions to accelerate the adoption of sustainable practices by our clients across the world.”

Olam’s managing director and group CFO, N Muthukumar adds, “Olam is delighted to partner with Deutsche Bank to implement Asia’s first ESG FX solution. This innovative facility provides us with a hedge on our currency risk exposure and enables Olam to lock-in a discount when we meet pre-set ESG targets that are aligned with our sustainability strategy and the United Nations Sustainable Development Goals. This is yet another way we are living our Purpose of reimagining global agriculture and food systems.”

The sustainability-linked derivative follows the concepts enshrined in the Loan Market Association (LMA) Sustainability-linked Loan Principles (SLLP), and follows the EU Sustainable Finance taxonomy.

“Green Finance has to date largely involved sustainability-linked loans, bonds and equities, where market standards are becoming standardised,” says Deutsche Bank head of ESG APAC Kamran Khan. “This sustainability-linked derivative transaction leverages Deutsche Bank’s world-class execution expertise and commitment to ESG to open an important new path for the global sustainable finance market.”

Colin Lambert

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