CME Launches Sustainable Clearing Service
Posted by Colin Lambert. Last updated: September 21, 2021
CME Group has launched what it says is the derivatives industry’s first-ever sustainable clearing service to help market participants track and report on how their hedging activities are advancing their sustainability goals.
The service will be launched on 27 September 2021 and will encompass both the trading of products such as carbon offsets, battery metals and bioenergy as well as interest rate and FX futures hedging activity that is carried out to support a sustainable business.
“Sustainability continues to be an increasing priority for our global clients as they significantly expand both the risk management that they provide to green businesses and environmental projects,” says Julie Winkler, chief commercial officer, CME Group. “This new framework for clearing sustainable derivatives will make it easier for our clients to measure the impact of their support for sustainable activities and can be part of the solution to encourage further growth in this key sector as the economy transitions to net-zero emissions.”
Sunil Cutinho, president, CME Clearing, adds, “This innovative clearing offering makes it simple for firms to track their sustainable derivatives positions by seamlessly integrating reporting into their existing workflows. Our solution ensures that all sustainable trades continue to benefit from our established risk management approach, including full margin offsets where applicable, which creates efficiencies for clients and end users.”
All participating futures commission merchants will be provided with sustainable clearing eligibility criteria to identify and tag their sustainable trades. The criteria will be aligned to external standards, such as the International Capital Markets Association (ICMA) Social & Green Bond Principles. CME says it will be ‘criteria neutral’ to ensure that only independent third-party standards are applied.
“As the bank for a changing world, we consider it our duty to assist our clients in reaching their sustainable related goals through the sustainable clearing service,” says Raphael Masgnaux, global head of prime solutions and financing and G10 rates, BNP Paribas, while Mick Hill, global product owner, exchange traded derivatives, at Standard Chartered Bank, says, “As a firm believer in how finance can catalyse a positive impact on our environment, Standard Chartered is delighted to have contributed to CME’s sustainable clearing solution and support the sustainable agenda of market participants.”
The criteria and governance of sustainable clearing will be administered by CME Benchmark Administration Limited, an independent legal entity within CME Group, that manages and operates the company’s benchmarks and indices. CME says a robust governance framework and an inclusive criteria committee based on ICMA principles will ensure that sustainable clearing operates with integrity and transparency, staying close to relevant standards in the industry as they evolve and mature.