The Commonwealth Bank has announced IFM Investors has invested $200 million in a new environmental, social and governance term deposit (ESG TD) that will only be used to fund loans that drive sustainable outcomes.
Described as being a first for the Australian market, CBA said that its ESG TDs allow investors to receive a fixed rate of return for the investment term like a traditional term deposit while the proceeds are allocated by the bank solely towards sustainability-linked loans (SLLs).
“The financial system has a critical role to play in supporting Australia’s decarbonisation journey by directing capital to projects and assets that will drive our transition to a more sustainable future,” said Commonwealth Bank group executive of institutional banking and markets Andrew Hinchliff.
“We are proud to partner with IFM Investors on this ESG TD which provides $200 million in additional capital for us to lend to initiatives driving positive ESG outcomes.”
SLLs link the cost of funding for borrowers to meeting predetermined sustainability targets that may include a reduction in emissions, waste or water use, or greater employee diversity.
Borrowers may receive a financial benefit or penalty depending on whether or not they reach the predetermined goals, which the bank said helps to incentivise progress towards a more sustainable future.
“We see this type of financing playing an important role in supporting significant assets across the community become more sustainable,” said IFM Investors treasury services portfolio manager Helen Tu.
“We are delighted to partner with CBA, and we particularly welcome their commitment to provide us with regular updates on the progress of initiatives being funded through the SLLs.”
CBA said that its ESG TDs had been certified as meeting the standards for responsible investing in Australia and New Zealand by the Responsible Investment Association Australasia (RIAA).
“In launching the ESG term deposit product, we open an important avenue for cash-rich institutions to support Australia’s transition to a more sustainable future,” said Commonwealth Bank acting executive general manager of global markets Chris McLachlan.
“By putting wholesale cash to work in support of sustainability-linked loans, we create a virtuous loop by connecting the ESG investor with CBA, which is connected to the ESG borrower.”
