NAB has closed its first Australian ESG-linked derivative.
The big four bank has announced it has closed its first Australian ESG-linked derivative with an ASX50 listed company.
ESG-linked derivatives are fairly new to the Australian markets but, according to NAB executive Drew Bradford, they provide an opportunity to incorporate sustainability objectives into every area of clients’ financing.
“Put simply, the product derives its value from both financial markets as well as a counterparty’s ESG performance,” Mr Bradford explained.
“They can be used to hedge interest rate, inflation or FX risk. They can be transacted when a client has entered into a sustainability-linked loan or bond or on a stand-alone basis,” he said.
For both corporates and investors, ESG considerations are becoming a key focal point of their operations.
“The ESG-linked derivatives market is still developing right across the world. The KPIs often go out to three or more years, so this is a long game and all about making sustainability core to business strategy,” Mr Bradford said.
NAB previously committed to delivering $70 billion in environmental financing by 2025.