KUALA LUMPUR: CIMB Bank has entered into a sustainability-linked derivative (SLD) transaction with Standard Chartered Malaysia in the form of an interest rate swap with a notional value of RM2.45bil for hedging purposes.

       According to the joint statement yesterday, this landmark deal is the world’s first ringgit denominated SLD transaction and to date Asia’s largest environmental, social and governance (ESG) linked derivative transaction by notional value.

       They said this was based on publicly available data and the latest data compiled by the International Swaps and Derivatives Association as at January 2021.

       Importantly, the landmark SLD transaction has been structured to involve a pricing mechanism whereby a discount (cost reduction) or premium (penalty) will be applied depending on whether CIMB Group achieves pre-agreed sustainability performance targets (SPTs).

       The ESG overlay of this instrument has been structured around two key performance indicators (KPIs) that reinforce recently announced sustainability commitments made by CIMB Group.

       The two KPIs are the Group’s percentile ranking for banks based on the S&P Global Corporate Sustainability Assessment in support of the group’s aspiration to be an industry leader on the Dow Jones Sustainability Index, and reductions in scope one and two greenhouse gas emissions in line with the Group’s net- zero ambitions.

       The SPTs that have been set are material, ambitious, objective, measurable and verifiable by independent sources.