The Commonwealth Bank (CBA) has announced it will begin offering environmental, social and governance term deposits (ESG TDs) in foreign currencies following strong demand locally.
Over $1.5 billion in funding has already been raised through CBA’s ESG TDs since they were first launched in December last year with a $200 million investment from IFM Investors.
“This new foreign currency capability expands the appeal of our ESG TDs to international customers managing multi-currency portfolios,” commented CBA executive general manager, global markets, Chris McLachlan.
“We are committed to continued innovation in sustainable finance and playing a leading role in financing Australia’s transition to a low-carbon economy.”
CBA’s ESG TD program will offer deposits denominated in a range of foreign currencies including US dollars and Euros. According to the bank, the ESG TDs provide institutional depositors with the opportunity to finance its portfolio of sustainability-linked loans (SLLs).
SLLs link the cost of funding for borrowers to meeting predetermined sustainability targets that can include a reduction in emissions, waste or water use, or greater employee diversity.
The ESG TDs provide a fixed rate of return like a regular term deposit but come with a commitment from CBA to direct all of the proceeds towards SLLs.
“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,” said 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.”
CBA said that the ESG TDs, which are certified by the Responsible Investment Association Australasia, have attracted the interest of a wide range of wholesale customers.
“We’ve had strong client engagement on this product across a wide suite of market participants, from super funds, asset managers and local councils to, more recently, corporate clients seeking meaningful ESG cash management solutions,” said CBA institutional sales MD Anthony Kritikides.
“We are proud to offer another avenue for clients to support Australia’s transition.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.