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CME launches first-ever sustainable derivatives clearing – The Asset

Firms, clients able to measure impact, show support for ESG objectives, green hedging activities

CME Group, the world’s most diverse derivatives marketplace, announced the launch of the derivatives industry’s first-ever sustainable clearing service to 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,” says Julie Winkler, chief commercial officer, CME Group. “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.”

“This innovative clearing offering makes it simple for firms to track their sustainable derivatives positions by seamlessly integrating reporting into their existing workflows,” adds Sunil Cutinho, president, CME Clearing. “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.”

All participating futures commission merchants will be provided with sustainable clearing eligibility criteria to identify and tag their trades. The eligibility criteria will be aligned to external standards, such as the International Capital Markets Association (ICMA) Social & Green Bond Principles. CME will be ‘criteria neutral’ to ensure that only independent third-party standards are applied.

The criteria and governance of sustainable clearing service will be administered by CME Benchmark Administration, an independent legal entity within CME, that manages and operates the company’s benchmarks and indices. A robust governance framework and an inclusive criteria committee based on ICMA principles will ensure that the sustainable clearing service operates with integrity and transparency, staying close to relevant standards in the industry as they evolve and mature.