INNOVATION & TRANSFORMATION: ENVIRONMENT Just the start: Green hedging currency exchange could be an on-ramp for companies wanting to decarbonise
Green shoots of change Alex Lawson from Western Union Business Solutions and Sarah Leugers of the Gold Standard Foundation believe payments and financial services can and should help save the world Initiatives like the Paris Climate Change Agreement are pushing firms globally to instate zero-emissions drives at the heart of their business strategies. The urgent need to prevent further damage to Earth is now at the forefront of most minds, given the steady flow of stark statistics about the destruction to vital ecosystems. Payments, and the financial industry in general, have not necessarily been the first thought when considering our planet’s biggest problems. However, they’re far from exempt. The power required by vast data centres to process the kind of information now inherent in the rapidly increasing flow of financial transactions worldwide, is huge, and will grow again with the implementation of the ISO 20022 messaging standard, which requires
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additional context – i.e. computational power – for every payment made. But financial players also have unique potential to catalyse positive change by offering environmental, social and governance (ESG)–weighted solutions, like the Green Hedging Product forged from a partnership between Western Union Business Solutions (WUBS) and global ESG benchmarking organisation the Gold Standard Foundation. It’s aimed at helping organisations large and small to change the world, little by little. Alex Lawson, director of hedging for UK and Europe at Western Union Business Solutions arm, explains: “We wanted to see how we could enable business customers to start taking steps to address climate change through transactions they’re doing anyway.” So, it embedded potential carbon offsets into hedging against the currency risk inherent in cross-border payments, where the market can shift in the period between ordering and paying for/taking delivery of goods. Purchasing a hedging product can fix the rate of exchange to an agreed future date, reducing or eliminating that risk. “Customers importing or exporting goods and services have to do this all the time. So, we decided we could harness this and use such transactions to divert some of
the revenues generated to a partner organisation, which could invest them into environmental projects, with carbon offset outputs,” says Lawson. Western Union Business Solutions charges a small premium, of 0.1 per cent of the amount to be traded, equating to an additional cost of $1,000 on a $1million transaction. This amount is inconsequential to the companies concerned, it can sometimes be offset by constantly shifting exchange rates anyway, explains Lawson. But the amount diverted towards ESG projects as a result, can have a hugely positive impact, especially as WUBS matches whatever is raised. Its customers can also choose from six project options in return for a carbon offset certificate for the full amount – which could equate to 200 tonnes or more of carbon offset with a $1million transaction. The collaboration with the Geneva-based Gold Standard Foundation, which was founded 20 years ago to maximise the impact of climate intervention, gives the initiative credibility and, Lawson hopes, will serve as a ‘jumping-on point’ from which organisations will go on to do more. “We wanted to be ambitious in who we partnered with, and Gold Standard sets the benchmark for the whole world,” he says. ffnews.com
