Hang Seng Bank [0011:HK] has recently issued China’s first interest rate derivative with environmental, social, and governance (ESG) clauses, as reported by Sina on April 29. China Molybdenum [3993:HK] was the one that participated in the issuance this time. This will not only help to increase the activity of the LPR derivatives market, strengthen the attention on ESG and carbon neutrality, but also help companies prepare for ESG documents that may be required by the Shanghai and Shenzhen Stock Exchange.
Earlier, HKEX’s [0388:HK] guidance has introduced mandatory ESG disclosure requirements. Although the Shanghai and Shenzhen Stock Exchange have yet to issue the requirements, the market believes that the two bourses will announce relevant policies in the next two years, which will also be a big challenge for listed companies. Interest rate derivatives are used to circumvent the risk of LPR interest rate volatility. The inclusion of the ESG clauses in the interest rate derivatives by Hang Seng Bank not only helps its client to prevent and manage potential interest rate risk but also enables its client to further reduce financing cost, achieve sustainable and high-quality development through low carbon, energy-saving and environmental protection.