RHB Bank completes first ESG-linked cross-currency interest rate swap in Malaysia

Khairussaleh says 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.

Khairussaleh says 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.

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KUALA LUMPUR (Dec 2): RHB Bank Bhd said it had successfully structured the country’s first green cross-currency interest rate swap transaction that was set against environmental, social and governance (ESG)-linked key performance indicators (KPIs) to hedge a US$100 million (about RM423 million) two-year sustainable loan.

RHB said in a Thursday (Dec 2) statement that the landmark transaction further solidifies its commitment towards enhancing growth of the rapidly evolving ESG market within the Malaysian banking sector. 

The bank added that the KPIs for the green cross-country interest rate swap were linked to RHB’s green financing commitment and target of RM5 billion to support green financing by 2025, which is part of the bank’s core business activities of lending, capital markets, advisory and investment.

The statement also said that the transaction was executed with Standard Chartered Bank and that RHB had extended a total of RM3.79 billion to green activities, of which 19% was attributed to renewable energy projects as at September 2021.

“The structuring and successful execution of Malaysia’s first green cross-currency interest rate swap transaction drives sustainable value creation for our stakeholders and underlines RHB’s position as a leader within the ESG derivatives market. 

“With growth in sustainable investing, we are also seeing increasing demand for derivatives products specifically linked to the ESG KPIs and where returns are linked to the sustainability performance and targets.

“This first in market transactions marks the beginning of our journey in developing customisable sustainability-linked derivatives 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,” RHB group managing director (MD) and group chief executive officer (CEO) Datuk Khairussaleh Ramli said in the statement.

Khairussaleh added that 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. The transaction also provides RHB’s customers with access to sustainable hedging solutions to manage their financing activities more effectively and contributes further to the bank’s vision to create a positive impact through its business activities as a responsible financial services provider, according to Khairussaleh.

“We are honoured to be working with RHB to provide such a solution to Malaysia’s financial market. Supporting sustainable and responsible growth, including delivering the United Nations’ Sustainable Development Goals and the transition to net zero, represents a significant opportunity to us. Collaborations with like-minded partners such as RHB will help to push the adoption of sustainable practices in the industry,” Standard Chartered Malaysia MD and CEO Abrar A Anwar said.

RHB said it will continue to take an active role in driving ESG integration across its business and operations, noting that it recorded an improvement in its S&P Global ESG Score at 43/100 in 2020 from 23/100 in 2019.

Meanwhile, the fourth largest bank by asset size in Malaysia also said that it had been named as a constituent of the FTSE4Good Bursa Malaysia Index. It is also in the top 25% of public listed companies in the FTSE Bursa EMAS Index while maintaining an AA rating in the MSCI ESG Ratings since September 2019.

Shares in RHB were unchanged at RM5.24 on Thursday, giving the banking group a market capitalisation of RM21.8 billion.

Joyce Goh