CME Group, which runs several leading derivatives exchanges, announced the launch of the derivatives industry’s first-ever Sustainable Clearing service on Sept. 27.
This new service will help market participants track and report on how their hedging activities are advancing their sustainability goals. Sustainable derivatives encompass both the trading of products such as carbon offsets, battery metals and bioenergy as well as interest rate and foreign exchange futures hedging activity that is carried out to support a sustainable business.
“Sustainability continues to be an increasing priority for our global clients as they significantly expand both the risk management that they provide to green businesses and environmental projects,” Julie Winkler, chief commercial officer of CME Group, said. “This new framework for clearing sustainable derivatives will make it easier for our clients to measure the impact of their support for sustainable activities and can be part of the solution to encourage further growth in this key sector as the economy transitions to net-zero emissions.”
All participating futures commission merchants will be given the Sustainable Clearing eligibility criteria to identify and tag their sustainable trades. The criteria will be aligned to external standards, such as the International Capital Markets Association (ICMA) Social & Green Bond Principles.
“This innovative clearing offering makes it simple for firms to track their sustainable derivatives positions by seamlessly integrating reporting into their existing workflows,” Sunil Cutinho, president of CME Clearing, said. “Our solution ensures that all sustainable trades continue to benefit from our established risk management approach, including full margin offsets where applicable, which creates efficiencies for clients and end users.”
The criteria and governance of Sustainable Clearing will be administered by CME Benchmark Administration, an independent legal entity within CME Group.
“As a firm believer in how finance can catalyse a positive impact on our environment, Standard Chartered is delighted to have contributed to CME’s Sustainable Clearing solution and support the sustainable agenda of market participants,” Mick Hill, global product owner of Exchange Traded Derivatives at Standard Chartered Bank, said.
CME Group owns several exchanges including the Chicago Mercantile Exchange, Chicago Board of Trade (CBOT), and the New York Mercantile Exchange.