Overview of ESG-related Derivatives Products and Transactions

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

FRTB Impact on Correlation Trading

The capitalization of the correlation trading portfolio (CTP) under the Fundamental Review of the Trading Book will have an adverse economic impact for users of these instruments. In particular, there is a lack of clarity and consistency in the application...

A Path to Greater CFTC-SEC Alignment

Earlier this week, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) held a roundtable on regulatory harmonization – an initiative we wholeheartedly support. The US regulatory framework has evolved over time to facilitate financial markets...