The transition to a sustainable economy will take a massive amount of long-term funding. The financial services sector will be an essential partner in providing this funding and managing the risks associated with sustainable investments, including project risk and interest rate and currency risks.
Derivatives markets can play an essential role in this process. Derivatives enable more capital to be channeled towards sustainable investments; help market participants hedge risk related to environmental, social and governance (ESG) factors; facilitate transparency, price discovery and market efficiency; and contribute to long-termism.
This paper is intended to help market participants further understand the potential role of derivatives in sustainable finance. The paper outlines the range of product structures and transaction types that comprise the universe of ESG-related derivatives, including sustainability-linked derivatives; ESG-related credit default swap indices; exchange-traded derivatives on listed ESG-related equity indices; emissions trading derivatives; renewable energy and renewable fuels derivatives; and catastrophe and weather derivatives.
Documents (1) for Overview of ESG-related Derivatives Products and Transactions
Latest
Recognition of Cross-product Netting is Critical
US regulators are in the process of making important changes to the regulatory capital framework by proposing modifications to the enhanced supplementary leverage ratio, which should help stop it from acting as a non-risk-sensitive constraint on bank capacity – a...
ISDA, GFXD Response to FCA on SI Regime
On September 10, ISDA and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association responded to the Financial Conduct Authority's (FCA) consultation paper CP25/20 on the systematic internalizer (SI) regime for derivatives and bonds. ISDA and the...
ISDA, IIF Response to PRA on Market Risk Framework
On September 12, ISDA and the Institute of International Finance (IIF) submitted a joint response to the Prudential Regulation Authority’s (PRA) consultation on adjustments to the market risk capital framework (CP 17/25). ISDA and the IIF strongly believe the market...
ISDA Response on Clearing Costs
On September 8, ISDA responded to consultation by the European Securities and Markets Authority (ESMA) on a draft regulatory technical standard on clearing fees and associated costs (article 7c(4) of the European Market Infrastructure Regulation (EMIR)). In the response, ISDA...