ISDA Highlights Potential of ESG-Related Derivatives in Sustainable Finance
In a new paper "intended to help market participants further understand the potential role of derivatives in sustainable finance," ISDA described "product structures and transaction types that comprise the universe of environmental, social and governance ("ESG")-related derivatives." ISDA stated that the purpose of the paper is to provide market participants with more information on the subject following ISDA's recently sponsored report (see related coverage).
ISDA highlighted, among other things:
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sustainability-linked derivatives;
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ESG-related credit derivatives;
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ESG-related exchange-traded derivatives;
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emissions trading and allowances;
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trading in renewable energy and fuels; and
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catastrophe and weather derivatives.
Commentary
The ISDA paper is more descriptive than prescriptive and it provides a useful collection of the various ways in which derivatives market participants have crafted financial products to cater to the ESG-related needs of customers.