ANZ launches sustainability-linked derivatives

  • By Elizabeth Fry

ANZ on Tuesday announced the launch of a sustainability-linked derivative product in Australia, Hong Kong, Japan, and Singapore as banks everywhere swiftly capitalise on a growing market for selling products that respond to investor concerns about environmental, social, and governance issues. 

According to the bank’s head of sustainable finance Katharine Tapley, ANZ is among very few banks globally to offer sustainability-linked derivatives, adding that these products are a natural evolution of the sustainable finance market. 

“This latest sustainable finance-related offering broadens our suite of products and services for our customers, in line with increased demand we are seeing across all industries and market segments,” Tapley said. 

ANZ plans to launch this product in other major financial markets later this year. 

The new product range includes swaps, forwards, cross-currency swaps, interest rate, and foreign exchange options executed alongside sustainability-linked bonds or sustainability-linked loans.   

A sustainability-linked derivative has a pricing component tied to the sustainability targets of the underlying bond or loan; the bank stated  

Increased investor appetite 

With net-zero commitments in the spotlight, an acceleration in low-carbon energy investment and technological innovation has been supporting ESG securities issuance, along with strong investor appetite, according to the Institute for International Finance.  

The IIF said sustainable debt issuance is on track to surpass a record $1 trillion in 2021 

ANZ closed Australia’s first sustainability-linked Loan in 2018 as well as the first sustainability-linked bond in the Australian dollar bond market earlier in June. 

The lender has a $50 billion commitment to fund and facilitate sustainable solutions for customers by 2025, including initiatives to help improve environmental sustainability, increase access to affordable housing and promote financial wellbeing. 

Other Aussie banks have also upped their sustainability credentials. Commonwealth Bank has arranged a sustainability-linked loan with Queensland beef producer Stockyard Group and helped structure a $2.2 billion sustainability loan for Celsus, the consortium responsible for designing, financing, constructing, and operating non-clinical services at The Royal Adelaide Hospital.