KUALA LUMPUR: RHB Banking Group has structured Malaysia's first green cross-currency interest rate swap transaction to hedge a US$100 million two-year sustainable loan based on environmental, social, and governance (ESG) linked key performance indicators (KPIs).
RHB said this landmark green cross-currency interest rate swap transaction further solidifies the bank's commitment to enhancing the rapidly evolving ESG landscape within the Malaysian banking sector.
"KPIs for the green cross-currency interest rate swap is linked to RHB's green financing commitment of RM5 billion in support of green financing by 2025, which entails the group's core business activities of lending, capital markets and advisory as well as investment," it said.
RHB Banking Group chief executive officer and group managing director Khairussaleh Ramli said the structuring and successful execution of the transaction drive sustainable value creation for the bank's stakeholders and underlined its position as a leader within the ESG derivatives market.
Khairussaleh said with the growth in sustainable investing, the bank also sees increasing demands for derivative products, linked explicitly to ESG KPIs and where returns are linked to sustainability performance and targets.
"This first in market transaction marks the beginning of our journey in developing customisable sustainability linked derivative transactions using measurable KPIs.
"This will promote climate action and the adoption of sustainable practices leading to the realisation of actual impact and change in the real economy," he said.
Meanwhile, Khairussaleh said pioneering the hedging of a sustainable loan with a green cross-currency swap is a testament to RHB's commitment to adopting green considerations across its financial services supply chain.
He said this also provides the bank's customers with practical access to sustainable hedging solutions to manage their financing activities effectively.
"This will further contribute to our vision to create a positive impact through our business activities as a responsible financial services provider," he said.
Completing the green cross-currency interest rate swap, executed with Standard Chartered Bank, exemplifies RHB's commitment to supporting the growth of the green economy by encouraging its stakeholders, including customers and business partners, to adopt more sustainable business practices.
A total of RM3.79 billion has been extended to green activities by the group, of which 19 per cent is attributed to renewable energy projects as of September 2021.