Deutsche Bank has executed its first ESG-linked repo trade globally with Turkey’s Akbank, which it claims is the first in the Central and Eastern Europe, Middle East and Africa (CEEMEA) region.
The $300 million repo transaction is structured with goals including gender balance, electricity sourcing of Akbank from renewable resources, and no greenfield coal power plant loan origination.
Akbank partnered with Deutsche Bank to structure and execute the transaction.
While the bond market has made great strides in furthering the ESG agenda, the repo market is still working out the role it can play in sustainability.
In a report from April, the International Capital Market Association (ICMA) said it is not obvious “whether there is any scope for repo to play a more active role in supporting sustainable finance beyond the funding of green and sustainable bonds, whether or not through a standard green bond basket”.
The association added: “A green repo market could be envisioned as one where buyers and sellers would only transfer bonds that are classified as green. The Green Bond GC Basket launched by Eurex in November 2020 is one example of this type of ‘green repo’ and other CCPs and tri-party agents are likely to offer similar baskets in the future.”
Commenting on the launch, Orhan Ozalp, head of global emerging markets (GEM) for Central and Eastern Europe and CEO of Deutsche Bank AS Turkey, said: “This first-of-a-kind regional transaction is evidence of our ESG structuring ability, expertise in designing ESG metrics, and commitment to working in partnership with a leading institution to create positive impact on society.”
In April, State Street established an ESG-aware commingled cash collateral reinvestment strategy, a first for its agency lending business.
The global custody bank partnered with its buy-side arm, State Street Global Advisors (SSGA), to provide securities lending clients with the strategy that also follows short-term investment guidelines, while using its proprietary ESG scoring system R-Factor in making investment decisions.