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Saturday, April 20, 2024

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CIMB launches sustainability-linked treasury program; customizable for Islamic clients

Malaysia’s CIMB Bank has launched a sustainability-linked treasury program to allow clients to embed their ESG aspirations into thematic treasury risk management solutions. The bespoke treasury program can be customized on a case-by-case basis for clients who require a Shariah compliant version, Chu Kok Wei, CIMB Group’s co-CEO of group wholesale banking, told ISFI.

“The rollout of this program is intended to provide customers with the ability to transition from one-off transactions that the market has seen, into this recurring business-as-usual flow program, reflecting the maturity of both ESG treasury solutioning as well as clients’ acceptance,” Chu shared.

According to the bank, the program is a first in Malaysia. It encompasses recurring flow transactions for business activity conversion cycles such as imports and exports in addition to episodic balance sheet hedging.

The sustainability-linked feature of the program is in the form of sustainability-linked rebates which are measured based on customized pre-agreed sustainability performance targets based on each client’s business profile.

For Islamic solutions, which have yet to be offered, sustainability-linked payments or rebates can be structured using Shariah principles such as Hibah, Ibra and/or commodity Murabahah, Chu explained.

The sustainability program was launched on the 7th December 2022 with Farm Fresh and Sunway Treasury as the first clients of the program.

The launch of the program represents the group’s continued effort in the treasury solutions and sustainability space. In June 2022, CIMB Islamic Bank entered into a landmark RM1 billion (US$226.88 million) sustainable collateralized commodity Murabahah (CCM) transaction with Standard Chartered Saadiq.

While the CCM was based on a use of proceeds approach whereby transaction proceeds of the CCM were earmarked against eligible Shariah compliant projects within the group’s Sustainable Development Goals Bond and Sukuk Framework, the sustainability-linked program follows a performance-based arrangement, similar in nature to the group’s previous RM2.45 billion (US$555.87 million) sustainability-linked derivative transaction with Standard Chartered Malaysia in 2021, Chu shared.

“Moving forward, CIMB seeks to continue to support clients’ needs by structuring and executing innovative treasury solutions with ESG-related pricing components or utilization of proceeds,” Chu added.

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