Deutsche Bank announced today the creation of the world’s first hedging concept that links currency options to sustainability goals, in an agreement reached with metallurgical plant solutions provider Primetals Technologies.
According to Deutsche Bank, the new framework enables Primetals to hedge its currency risk with FX options with the bank over a period of four years, with hedges linked to a range of sustainability targets, including the proportion of total sales of projects sold that aim to reduce greenhouse gas emissions for customers, the ratio of revenues relative to R&D spend that results in improved resource efficiency, and Primetals’ promotion of a safe and healthy work environment for staff. In the event that Primetals fails to meet the agreed sustainability targets, the company must pay a predefined sum to a contractually defined non-governmental organisation.
Gerald Podobnik, Chief Financial Officer of Deutsche Bank’s Corporate Bank and member of the German government’s Sustainable Finance Advisory Council, said:
“Our bank seeks to play an active role in achieving the targets of the Paris Climate Agreement. That is why we plan to develop more and more financial products that are linked to sustainability targets. In so doing we will assist our clients in implementing their sustainability strategies and monitor their achievements over the longer term as well.”
Marc Müller, Head of Corporate Coverage in Germany, Austria and Switzerland at Deutsche Bank, added:
“This worldwide completely new structure helps us link Primetals’ sustainability efforts with the need for currency hedging – and it’s something many of our internationally active clients will be interested in.”
Deutsche Bank stated that currency hedges executed under the new agreement will comply with the criteria of the new Sustainable Finance Framework that the bank published at the end of July. In doing so the bank has devised criteria for the classification of ESG financing which are aligned on a best-effort basis to the new EU Taxonomy Regulation. The companies also said that the ESG criteria for the agreement were selected using advice from independent consultancy Environmental Resources Management (ERM).
Yoshiharu Ikeda, Chief Financial Officer of Primetals Technologies, said:
“As a global pioneer in the metal industry sector we are proud of constantly developing trend-setting innovations and assisting our clients in implementing green steelmaking. Also measuring the success of our sustainability targets by our financial products illustrates the high regard for sustainable value creation at Primetals Technologies.”