Major market participants trade first triparty repo on ESG bonds in China
The China Foreign Exchange Trading System (CFETS) and global post-trade provider Clearstream have entered an infrastructure cooperation to enable Chinese market participants to trade ESG (environmental, social, governance)-eligible triparty repo bonds. The repo transactions are facilitated by CFETS’s exclusive bond and FX trading platform in mainland China, while Clearstream acts as triparty repo agent, streamlining collateral management, settlement and custody.
First trades were successfully performed by China Construction Bank, China Merchants Bank, Crédit Agricole CIB, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank. All participants chose all eligible ESG bonds based on dedicated baskets provided by Clearstream. Leveraging triparty repo bonds, investors will benefit from diversified sources of funding, combined with a high degree of safety as well as outsourced collateral management and administrative functions.
Philip Brown, CEO of Clearstream Banking S.A., commented: “As a leading provider of global post-trade services, it’s at the heart of Clearstream’s mission to support investors around the globe who are seeking to include environmental, social, and governance aspects in their investment decisions. The cooperation aligns perfectly with this goal. We are excited, together with our renowned partners, to provide innovative, stable and internationally connected financial infrastructure to the largest market in Asia.”
Yuankai Wang, General Manager of Financial Markets Department, China Construction Bank, added: “Repurchase transaction has always been one of the main financing tools in financial markets. As the concept of sustainable development is increasingly valued, it is expected that green repurchase transactions are going to gradually become popular. We will continue to focus on green and sustainable development transactions, and develop more diversified green financial solutions.”
Jiawen Peng, General Manager of Asset and Liability Management Department, China Merchants Bank, added: “Repurchase transaction is an important financing tool in the interbank foreign exchange market. These triparty repo trades on ESG eligible foreign currency bonds are the result of joint efforts made by domestic and foreign institutions to promote the development of FX market infrastructure, which will further promote the development of green finance. China Merchants Bank has always been committed to the development and innovation in ESG finance. We are honoured to participate in the first batch of transactions and will continue to contribute.”
Xiaoming Zhu, Head of the Global Markets Division, Crédit Agricole CIB (China) Limited, added: “Crédit Agricole CIB has been a global leader in providing innovative green and sustainable financial products, and it is our great honour to cooperate with CFETS, Clearstream and Chinese financial institutions to execute the first triparty ESG foreign currency repo business. We have been adhering to the philosophy of actively promoting green finance and developing more diversified green finance solutions to support our clients to achieve their sustainable development goals.”
Changfa Zhu, General Manager of Global Markets Department, Industrial and Commercial Bank of China, added: “Triparty repo, as a common type of repo transaction in the global financial market, by tapping into the collateral management service of third-party professional institutions, contributes to a higher-efficient and lower-risk way of involvement in repo business by market participants. FX triparty repo with green bond as the collateral, while adding a new variety of repo trade to the onshore market, also manifests the development concept of green finance. Looking into the future, we would like to join the hands of financial peers to promote the development of onshore FX repo business and green finance.”
Hongli Xue, General Manager of Financial Markets Department, Shanghai Pudong Development Bank, added: “Acting as one of the most active participant in the domestic interbank market, SPD Bank makes continuous strides in business innovation. Building 'Green Bank' is one of the most important strategy of our bank. Diversified financial market business are actively adapted to the trend of green, such as green finance, green bond, etc. By the end of 1st half of 2022, we launched 'ChinaBond SPDB ESG Bond Select Index‘, issued the first domestic European Union carbon emission quota linked structure product, which is a milestone of green trade. We are very honoured to participate to trade ESG-eligible triparty repos provided by CFETS and Clearstream because it represented an innovative measure of 'Green Bank'. We will continue putting our efforts to promote the green financial markets business.”
As an international central securities depository (ICSD), headquartered in Luxembourg, Clearstream, which is part of Deutsche Börse Group, provides the post-trade infrastructure for the Eurobond market and services for securities from 59 domestic markets worldwide. With 16 trillion Euros in assets under custody, Clearstream is one of the world’s largest settlement and custody firms for domestic and international securities.
About China Construction Bank
China Construction Bank Corporation, headquartered in Beijing, is a leading large-scale commercial bank in China. At the end of 2021, the Bank’s market capitalisation reached US$175,302 million, ranking sixth among all listed banks in the world. The Group ranks second among global banks by Tier 1 capital. With 14,510 banking outlets and 351,252 staff members, the Bank serves hundreds of millions of personal and corporate customers. The Bank has subsidiaries in various sectors, including fund management, financial leasing, trust, insurance, futures, pension and investment banking, and has nearly 200 overseas entities covering 31 countries and regions. The Bank proactively practices “New Finance”, and fully promotes the implementation of the “Three Major Strategies” of house rental, inclusive finance and FinTech.
About China Merchants Bank
Founded in 1987 with its Head Office in Shenzhen, China, the Company is a commercial bank with distinctive operating features and market influence in China. During 2021, the Company adhered to the core value of “customer-centric and creating value for customers”, maintained its strategic determination, and actively explored and improved the 3.0 model. The advantages of the business model of extensive wealth management were highlighted, the digital operation model was increasingly improved, the open and integrated organisation model continued to evolve, and the core competitiveness was further strengthened. At the same time, the Company actively responded to the national call for “peaking carbon dioxide emissions” and “carbon neutral”, and for common prosperity by accelerating the construction of a new responsibility system of “environment, society and governance” with characteristics of China Merchants Bank.
About Crédit Agricole Corporate and Investment Bank (Crédit Agricole CIB)
Crédit Agricole CIB is the corporate and investment banking arm of Crédit Agricole Group, the 10th largest banking group worldwide in terms of tier balance sheet size (The Banker, July 2022). More than 8,900 employees across Europe, the Americas, Asia-Pacific, the Middle East and Africa support the Bank's clients, meeting their financial needs throughout the world. Crédit Agricole CIB offers its large corporate and institutional clients a range of products and services in capital markets activities, investment banking, structured finance, commercial banking and international trade. The Bank is a pioneer in the area of climate finance, and is currently a market leader in this segment with a complete offer for all its clients.
For many years Crédit Agricole CIB has been committed to sustainable development. The Bank was the first French bank to sign the Equator Principles in 2003. It has also been a pioneer in Green Bond markets with the arrangement of public transactions from 2012 for a wide array of issuers (supranational banks, corporates, local authorities, banks) and was one of the co-drafter of Green Bond Principles and of the Social Bond Guidance. Relying on the expertise of a dedicated sustainable banking team and on the strong support of all bankers, Crédit Agricole CIB is one of the most active banks in the Green bonds market.
For more information, please visit www.ca-cib.com
About Industrial and Commercial Bank of China
Industrial and Commercial Bank of China was established on 1 January 1984. The Bank provides a comprehensive range of financial products and services to over 9.691 million corporate customers and 704 million personal customers. At the end of 2021, total assets of the Bank amounted to RMB35,171,383 million. The Bank stays committed to seeking progress with innovation while maintaining stability, continuously enhances the key development strategies, actively develops the FinTech and accelerates the digital transformation. The Bank unswervingly delivers specialized services, and pioneers a specialized business model, thus making it "a craftsman in large banking". The Bank was ranked the 1st place among the Top 1000 World Banks by The Banker, the 1st place in the Global 2000 by Forbes, and the 1st place in the list of commercial banks of the Global 500 in Fortune for the ninth consecutive year, and took the 1st place among the Top 500 Banking Brands of Brand Finance for the sixth consecutive year.
About Shanghai Pudong Development Bank
Shanghai Pudong Development Bank, headquartered in Shanghai, was founded in 1993 and now is one of the top-notch joint-stock commercial banks. By the end of 2021, the bank's total assets stood at RMB7.9 trillion RMB. A national network was established with 39 tier-one domestic branches and 1,684 banking outlets covering all provinces in China. Three overseas branches in Hong Kong, Singapore and London maintained stable operation. The bank now ranks the 18th among 'Top 1000 Global Banks' subject to tier1 capital and the 201st among 'Fortune Global 500' list according to brand value.
In 2021, the bank formulated the group-wide strategic development plan and innovation plan for the 14th Five-year Plan period to draw a new blueprint for our high-quality development. The bank clearly put forward the strategy of three major transformations including asset-light, carbon peaking and carbon neutrality, and digitalization, in a bid to forge a sustainable profit model at a faster pace. Keenly aware of its duties as a flagship financial enterprise based in Shanghai, the bank spares no effort to support Shanghai in pressing ahead with the construction of an international financial center and Pudong New Area in building itself into a leading zone of socialist modernization.