Standard Chartered has launched a new ESG-Linked Cash Account for corporate banking clients that rewards them for meeting targets tied to environmental, social and governance (ESG) priorities.
“Through continued engagement, we know that many sustainability-focused clients are seeking to balance environmental and social impact alongside financial returns. As such, they are looking for ways to tie their treasury management to their organizational sustainability objectives,” states Sandrine Jourdainne, global head of Deposits and Liquidity Management for Standard Chartered. “Recognizing this, we introduced the ESG-Linked Cash Account so that corporates no longer have to compromise on financial returns or ESG outcomes. With this account, the interest rate on the cash account will be linked to the organization’s ESG-related performance. We are initially launching to clients in Hong Kong and Singapore, with the intention to scale to further markets over the coming months.”
In collaboration with clients, Standard Chartered works to set ESG-related key performance indicators (KPIs) and sustainability performance targets (SPTs) that align closely with their goals. “This targeted approach leads to meaningful change and lays a solid foundation for broader sustainability efforts in the future. The question isn’t whether they should engage in ESG initiatives, but rather how they can weave these into the fabric of their business strategy,” Jourdainne says.
A KPI example, according to Jourdainne, could be Scope 1 and 2 greenhouse-gas emission reduction, say, an SPT for an annual 5% cut. “Should the client achieve the agreed-to ESG-related targets, a preagreed payment of bonus interest will be made within an agreed timeframe.”
The KPIs and SPTs associated with ESG-Linked Cash Accounts will be subject to internal approval and verification, and Jourdainne says clients will be required to provide audited evidence of KPIs being met via a sustainability compliance certificate. The approach to setting the KPIs and associated targets will follow the principles applied to other sustainability-linked products with regard to assessment of the materiality and relevance of the KPIs and level of ambition of associated targets when compared with past performance, peer performance and industry/science-based benchmarks. KPIs and targets will be approved by select individuals within Standard Chartered who have expertise to appropriately assess these milestones.