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
Expanding the Universe of Eligible VM
ISDA conducted a series of interviews with buy- and sell-side firms to understand the drivers of a growing use of non-cash assets as variation margin (VM) for non-cleared over-the-counter (OTC) derivatives and the barriers that remain to expanding the use...
ISDA Response on Hedge Accounting Guidance
On August 14, ISDA responded to an exposure draft from the Financial Accounting Standards Board (FASB). ISDA broadly supports the FASB’s proposed targeted improvements to hedge accounting, including allowing interest rate hedging of held-to-maturity (HTM) debt securities, recognizing all Secured...
Joint Response to EBA Consultation
On August 12, ISDA and the Association for Financial Markets in Europe (AFME) responded to the European Banking Authority’s discussion paper on certain taxonomy key performance indicators (KPIs) and other aspects of the Disclosures Delegated Act under Article 8 of...
Response to JSCC on Clearing Fund Consolidation
On August 12, ISDA responded to the Japan Securities Clearing Corporation’s (JSCC) consultation on its proposal to consolidate clearing fund consumption, calculation and deposit segmentation across six clearing qualifications under the Financial Instruments and Exchange Act. ISDA members broadly support...