(19 July 2022 – Australia) CBA has launched its first international currency Environmental, Social and Governance Term Deposit (ESG TD) product, enabling large corporate depositors to match their sustainability targets with their transaction banking strategies.
CBA has already raised over A$1.5 billion in funding through its AUD denominated ESG TDs launched in December 2021. The product enables institutional depositors to finance CBA’s portfolio of sustainability-linked loans (SLLs) which incentivise companies to achieve improved ESG outcomes. Following the success of the AUD denominated product, the ESG TD program is being expanded to offer deposits denominated in foreign currencies including USD and EUR.
ESG TDs offer depositors a fixed rate of return but with a commitment from CBA to exclusively allocate the proceeds of these deposits toward the bank’s growing portfolio of SLLs. SLLs set sustainability performance targets such as reductions in greenhouse gas emissions or increases in Indigenous employment, and incentivise borrowers to achieve those goals over the course of the loan through financial incentives and/or penalties.
The focus on sustainable finance product innovation has also seen the group release its inaugural sustainability-linked derivative (SLD) with client Treasury Wine Estates (TWE). The AUD/USD cross-currency swap hedges balance sheet exposures while further incentivising TWE to achieve its ambitious sustainability targets by linking the coupon rate to their accomplishment. The SLD’s targets cover material areas for TWE including water stewardship, use of renewable electricity, female representation and CO2 emissions.
“ESG TDs provide another source of funding for Australia’s transition to a more sustainable economy. Access to institutional capital is critical for Australia’s transition to a more sustainable future and we’re proud that our innovative sustainable finance products are helping connect pools of capital to support the work of organisations transitioning their operations to be more sustainable” commented CBA Group Executive, Institutional Banking and Markets, Andrew Hinchliff.
“Exceptional inflows for our ESG TD product in just six months demonstrate the strong appetite among our clients to support Australia’s sustainability journey. It has created a significant new source of funding for our SLLs portfolio, extending our ability to finance new opportunities for clients” Hinchliff added.
“This new foreign currency capability expands the appeal of our ESG TDs to international customers managing multi-currency portfolios. We are committed to continued innovation in sustainable finance and playing a leading role in financing Australia’s transition to a low carbon economy” said CBA’s Executive General Manager, Global Markets, Chris McLachlan.
“The SLD transaction was the latest example of CBA supporting our clients in their transition efforts, as well as our commitment to leadership and innovation in sustainable finance. This is an exciting innovation as it supports our clients with their sustainability ambitions. It extends what we do in sustainable finance to include risk management, in addition to financing” stated CBA’s Managing Director of Client Risk Solutions, Hope Gatis.