HSBC rolls out ESG derivative product in Korea to facilitate market growth

It is a first of its kind transaction which offers direct incentives to a client to improve its ESG capabilities.

HSBC in Korea has completed the trade of a sustainability-linked derivative product on 23 March, according to a statement from the firm.

HSBC Global Markets in the country dealt a two-year structured $100m ESG-linked cross-currency swap to Hana Financial Investment, a major local financial institution.

This is a first of its kind transaction that offers direct incentives to a client to improve its ESG capabilities, as HSBC continues to support the development of the sustainable finance market in the country.

The product’s economic terms are directly linked to a specific ESG Key Performance Indicator (KPI), which the client pledges to achieve. Should the client successfully meet this target by maturity, they can receive a benefit in the form of a premium payment or discount. In this case, the KPI was linked to the client’s parent group’s ESG risk rating set by Sustainalytics, the statement said.

“With this ESG derivative, market participants will be able to enjoy a much wider and flexible range of sustainable finance products,” Eunyoung Jung, president and CEO of HSBC Korea.

HSBC recently announced to phase out the financing of coal-fired power and thermal coal mining by 2030 in EU and OECD markets, and in other markets by 2040. It also pledged to facilitate $750bn-1trn of financing and investment to help clients with their transition.