In a pioneering move, Standard Chartered launched a new financial product that aligns corporate treasury management with sustainability goals, potentially reshaping the future of business banking.
Standard Chartered, an international banking group, has taken a significant step forward in integrating environmental, social and governance (ESG) principles into corporate banking by launching its new ESG-linked Cash Account.
This innovative financial product, announced on August 12, 2024, is designed to reward corporate clients for meeting material ESG-related targets, marking a notable advancement in sustainable finance.
The ESG-linked Cash Account combines traditional corporate banking services with sustainability incentives. It works by linking the credit balance interest rate and/or fee pricing of the account to the client’s performance on predetermined ESG metrics. This mechanism creates a direct financial incentive for companies to pursue and achieve their sustainability goals.
Mahesh Kini, global head of cash management at Standard Chartered, emphasised the bank’s role in enabling and motivating companies on their sustainability journey.
“As companies move from ambition to execution on sustainability, banks play an important role in enabling and motivating them on this journey,” Kini stated. “The launch of our ESG-linked Cash Account is another testament to our commitment to offer our clients solutions that empower them to meet their treasury and sustainability goals.”
The new product is not a one-size-fits-all solution. Instead, it is tailored to each client’s specific circumstances and sustainability ambitions. The key performance indicators (KPIs) selected for each account must be material and relevant to the client’s business. Moreover, the associated targets must be ambitious when compared to external benchmarks, industry peers, or the client’s previous performance. This approach ensures that the ESG-linked Cash Account drives meaningful progress rather than rewarding easily achievable goals.
Standard Chartered’s move comes when sustainable finance is gaining significant traction globally. According to a report by Bloomberg Intelligence, ESG assets are on track to exceed $50 trillion (£39.13 trillion) by 2025, representing more than a third of the projected $140.5 trillion (£110 trillion) in total global assets under management. This trend underscores the growing importance of ESG considerations in financial decision-making and investment strategies.
The ESG-linked Cash Account is the latest addition to Standard Chartered’s suite of sustainable finance solutions. It complements existing offerings such as the Sustainable Account, which allows clients to support activities contributing to the United Nations Sustainable Development Goals, and the Sustainable Trade Finance Proposition, designed to promote sustainable practices in supply chains.
The bank’s approach to sustainable finance is comprehensive, covering various aspects of corporate banking. For instance, the Sustainable Financial Institution Trade Loan offering provides financial institutions with the liquidity needed to support trade flows associated with sustainable development. This holistic approach demonstrates Standard Chartered’s commitment to embedding sustainability across its corporate banking services.
The initial rollout of the ESG-linked Cash Account will begin in Hong Kong and Singapore, which will serve as pilot markets. Standard Chartered plans to expand the offering to additional markets in due course, potentially transforming corporate banking practices globally.
This initiative by Standard Chartered reflects a broader shift in the banking sector towards sustainable finance. As more corporations set ambitious ESG targets, financial products aligning with these goals will likely become increasingly prevalent. The ESG-linked Cash Account could serve as a model for other banks, catalysing a wave of similar offerings across the industry.
As companies navigate the complex sustainability landscape, financial products like the ESG-linked Cash Account provide tangible incentives for progress. By directly linking financial benefits to ESG performance, Standard Chartered supports its clients’ sustainability efforts and contributes to the broader goal of creating a more sustainable global economy.
The launch of the ESG-linked Cash Account underscores Standard Chartered’s position at the forefront of sustainable finance innovation. As the product rolls out across markets, it will be interesting to observe its impact on corporate sustainability practices and whether it inspires similar initiatives from other financial institutions.
To learn more about Standard Chartered’s mission to become the world’s most sustainable bank and how sustainability can revolutionise finance, read our previous interview with Chief Sustainability Officer, Marisa Drew.
