IFM Investors enters a $200 million ESG term deposit with CBA

  • By Zilla Efrat

In a first for the Australian market, IFM Investors, the global fund manager owned by industry super funds, has signed up for a $200 million fixed-rate, environmental, social and governance term deposit (ESG TD) with the Commonwealth Bank.

The ESG TD is certified by the Responsible Investment Association Australasia as meeting the Australian and New Zealand Standard for responsible investing.

It will enable institutional clients such as IFM Investors, which had $179 billion under management as at 30 September 2021, to effectively manage their cash while also providing the bank with an alternative source of funding to drive sustainable outcomes.

Much like a traditional term deposit, investors receive a fixed rate of return for the investment term. However, under the ESG TD, the bank will exclusively allocate the proceeds of these deposits to its growing portfolio of sustainability-linked loans.

“We know that the quality of the returns for long-term investors is a function of the quality and sustainability of the economic and financial system we invest in, now and in the years ahead,” says IFM Investors’ executive director for responsible investment, Chris Newton.

“Having responsible investment practitioners integrated with our investment teams effectively delivers new products like this one, which is aligned to our net-zero commitments and our purpose to protect and grow the retirement savings of working people.”

Sustainability-linked loans link the borrower’s cost of funding to the achievement of predetermined sustainability targets, such as reducing greenhouse gas emissions, waste or water use or social goals such as higher employee diversity at senior management levels.

If borrowers achieve the targets, they may get a financial benefit, and if they miss the targets, they may face a financial penalty.

“In launching the ESG TD product, we open an important avenue for cash-rich institutions to support Australia’s transition to a more sustainable future,” says Chris McLachlan, acting executive general manager, Global Markets at CBA.

“By putting wholesale cash to work in support of sustainability-linked loans, we create a virtuous loop by connecting the ESG investor with CBA, which is connected to the ESG borrower.”