National Australia Bank: NAB offers a new ESG financial innovation

NAB today announced that it has helped another client align its environmental, social and governance (ESG) objectives with its financial objectives, by entering into its first ESG-related foreign exchange (FX) derivative with TRIG, a listed company in London which invests in renewable energy infrastructure. projects.

ESG-linked FX derivatives are specialized products linked to ESG objectives. They encourage companies to take sustainability into account in their financial risk management.

NAB has worked closely with TRIG to ensure that the costs it incurs for its currency requirements are reduced when TRIG meets its established ESG objectives, which include clean energy, health and safety and community goals. .

David Gall, director of corporate and institutional banking at NAB Group, said a growing number of investors want to take action on social and environmental issues and that NAB continues to develop new ways to do this.

“It is our responsibility to continue to innovate and expand our products for clients, linking sustainability to all forms of financing. We continue to see growing demand for ESG-related products across many sectors and industries “, said Mr. Gall.

“We know that delivering great results for our customers can also deliver great results for our communities and the environment, and we are committed to tailoring our products with a long-term view.”

In addition to this first ESG-linked FX derivative, NAB has now closed six ESG-linked derivatives in the European market and one in Australia.

In addition to finding new ESG financial innovations, NAB is:

  • Align its loan portfolio with net zero emissions by 2050. NAB uses the International Energy Agency’s Net Zero Emissions Scenario (IEA NZE 2050) and has joined the Net Zero Banking Alliance (NZBA) convened by the United Nations as reference points to guide our decarbonization path. The latest science guides our methodology.

  • NAB is Australia’s leading bank for renewable energy lending. Renewables represent 71% of our total energy loans. Since 2003, we have completed 150 revolving finance transactions and lent more than $11.5 billion.

  • NAB has capped our oil and gas loans at US$2.4 billion. We are the first Australian bank to do so publicly and transparently. This cap will be reduced from 2026 to 2050, aligned with IEA NZE 2050.

  • NAB trains its bankers to ensure they understand this complex subject and can help our clients with financial innovations and advice. NAB wants top climate bankers to support these conversations with clients.

What are ESG-related currency derivatives?

  • The market for ESG-related FX derivatives is still developing. It is a risk management product that derives its value from both financial markets and the ESG performance of a counterparty.

  • In the case of an ESG-related derivative that hedges currency risk, the exchange rate charged by the arranger (e.g. NAB) decreases by an agreed amount if the client meets sustainability performance targets (SPT) predetermined.

  • An ESG-linked currency derivative can be tailored to specific preferences, but can include a range of improvements such as decarbonization, energy efficiency, workforce diversity or infrastructure electrification .

  • If a client reaches their SPTs, the overall transaction cost for the client will be reduced.

Warning

NAB – National Australia Bank Ltd. published this content on April 27, 2022 and is solely responsible for the information contained therein. Distributed by Audienceunedited and unmodified, on April 27, 2022 01:54:05 UTC.

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