NEWS | APAC
StanChart cashes in on ESG as change of direction pays off The UK bank for the first time has offered interest rates-linked structured notes with net proceeds allocated to finance green and social projects.
Available for subscription from the end of February to April, these structured notes raised a total traded notional or assets under management (AuM) of US$350m, according to Nicolas Rigois (pictured), global head of capital markets products and solutions, wealth management at Standard Chartered Bank (SCB). “Issued and structured by SCB, the notes offered a range of payoffs such as capped-floored floater, step-up and range accrual with tenor ranging between two and five years,” Rigois told SRP. “[They] allowed us to reach a broad set of clients in private banking and priority banking across our key markets in Asia and the Middle East.”
In an environment of rising rates and market volatility, the notes were designed with simple payoffs and offer full capital protection. SCB sustainability programme represents a strategy shift towards sustainable investing through structured products as the UK bank historically focused efforts on equity-linked ESG products with limited success.
inflationary backdrop, which are “less conducive to equity-linked products”.
Under SCB’s sustainability programme, the proceeds of equity-linked product shall be invested into sustainable projects by third-party derivative manufacturers while the reference assets must be qualified as ESG investment, according to SCB’s internal guidelines.
“However, we were fast to pivot towards other asset classes such as interest rate and FX derivatives which has reshaped the business,” he said.
“All structured notes have two components, a funding component and a derivative component that provides the structured exposure to an underlying,” said Rigois. “At the start of 2022, we decided to change our approach and really focus our message on the funding component of the note which is the key ESG component.” The change of popular underlying asset classes has reflected the evolving market conditions triggered at the beginning of 2022 on the back of heightened geopolitical tensions and an
In contrast, the first three months of 2021 translated to a record quarter for SCB’s structured product business fuelled by a very strong demand for flow equity derivatives in a relatively benign market context, according to Rigois.
In April, the bank, which focuses on flow strategies, delivered a stable traded notional of structured products in Singapore year-on-year. “Where the flows last year were almost exclusively equity-linked we now see a healthy balance between asset classes,” said Rigois. “Looking forward, with the rise in interest rates we expect to see sustained interest in principal-protected structures and plan to keep innovating in that space.” As the capacity of these ESG-linked structured notes was exhausted in the first round, Rigois noted that SCB will consider re-opening the programme once available.
At the start of 2022, we decided to change our approach and really focus our message on the funding component of the note
16
www.structuredretailproducts.com
