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Green deposits gain traction

Standard Chartered has announced that its sustainable deposit product has broken the US$2bn mark, including a significant deposit from the French integrated electricity company, EDF.

The product helps finance activities that support the United Nation’s Sustainable Development Goals (SDGs), including combating climate change, supporting financial inclusion, and tackling the lack of universal access to health and education.

Launched in May 2019, deposits reached US$1bn in January 2020 and then doubled in three months, highlighting that despite the recent economic turmoil brought by the COVID-19 pandemic, corporates are still keen to finance the SDGs in emerging markets.

The UN estimates US$3.9 trillion per year will be required to reach all 17 Goals by 2030 in emerging markets, but there is an existing investment gap of US$2.5 trillion per year. Standard Chartered has identified this is an area where it can help bridge the funding gap, given its presence in both developed and developing markets.

“While we are all rightly focused on combating the immediate impact of COVID-19, we also need to ensure that there is sustainable and equitable growth afterwards, as highlighted by the UN’s Sustainable Development Goals," said Simon Cooper, CEO of Corporate, Commercial & Institutional Banking at Standard Chartered. 

“With this deposit EDF continues its constant policy of anticipation of its financial needs, confirms its strong liquidity position and aligns its short-term financing strategy with its goal of being a responsible company committed to a just and fair transition,” commented Xavier Girre, group senior executive vice-pPresident, Group Finance at EDF.

Funds raised from the deposit are used to help finance the SDGs in the following ways in Africa and Asia: 67% in loans to entrepreneurs in low income countries; 21% in sustainable projects - the majority being financing for wind power; and 12% in microfinance loans for financial inclusion.

Standard Chartered also recently announced it would commit US$1bn of financing for companies that provide goods and services to help the fight against COVID-19, and those planning the switch into making products that are in high demand to fight the global pandemic.

A green momentum

The bank launched the sustainable deposit instrument almost exactly one year ago for corporates and institutional clients. At the time, the bank noted that while green deposits - dedicated to renewable energy - are increasing in popularity, it was the first time any bank has launched a corporate deposit product linked to sustainability and the SDGs, which focus on addressing global challenges such as poverty, inequality and prosperity.

Other banks are showing willingness to pursue this type of instrument for corporates, alongside a variety of other green solutions. In January this year, CTMfile reported on HSBC’s Green Deposits debut in UK and Singapore. Green Deposit clients receive a quarterly, portfolio-level view of how their funds have been used to support green projects. The bank says that clients will also be able to manage their green account as simply as a regular deposit account.

As recently as yesterday, Reuters reported that Citi is launching a new business unit within its Corporate and Investment Bank dedicated to environmental sustainability, noting that the area has grown increasingly important to corporate clients and investors. 

With the momentum behind green banking products for corporates, lets hope in the coming years these options become the norm rather than the exotic choice, embedding ESG at the heart of financial world.

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