Food trader and agri-business Olam International and Deutsche Bank have announced the successful execution of Asia’s first foreign exchange (FX) derivative linked to environmental, social and governance (ESG) key performance indicators.
The ESG-linked FX (Thai baht-US dollar) forward enables Olam to lock in a discount when it meets pre-defined ESG targets that support the United Nations’ Sustainable Development Goals (SDGs).
The FX risk solution marries the requirement to hedge the FX risk arising from growing a crop in one country with that of selling it in another country, and supports Olam’s programme to strengthen supply chain sustainability.
The sustainability-linked derivative follows the concepts enshrined in the Loan Market Association’s sustainability-linked loan principles and the European Union’s sustainable finance taxonomy.
“Green finance has to date largely involved sustainability-linked loans, bonds and equities, where market standards are becoming standardized,” says Kamran Khan, Deutsche Bank’s head of ESG, APAC. “This sustainability-linked derivative transaction leverages our execution expertise and commitment to ESG to open an important new path for the global sustainable finance market.”