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Industry roundup: 23 September

Goldman Sachs, Xylem launch ESG-linked demand deposit account

Goldman Sachs Transaction Banking Services has launched an environmental, social and governance (ESG)-linked demand deposit account, with global water technology company, Xylem, as its anchor client, the two companies have announced.

The Goldman Sachs Transaction Banking (TxB) product links the yield clients earn on their deposits to the achievement of their own ESG targets. ESG-focused companies, like Xylem, stand to earn higher yields as they deliver on their sustainability strategies. The product is structured as a demand deposit account, so clients can access liquidity whenever they need it.

Xylem is adding the ESG-linked deposit account to its suite of green financing tools. In 2019, the company executed a US$800m revolving credit facility with a sustainability-linked pricing mechanism, the first of its kind in the US General Industrial Sector. In 2020, it completed a US$1bn green bond offering, the proceeds of which were allocated to projects that improve water security and advance sustainability.

"This ESG-linked account is strongly aligned with our view that sustainability should be at the heart of both our business strategy and our financing approach," said Sandy Rowland, chief financial officer at Xylem. "Our business is innovating in technologies that deliver more sustainable outcomes for our customers and other stakeholders. Banking products that recognise and reward ESG achievement are a welcome step forward in managing financing and sustainability interdependently. This account does that while delivering the flexibility we need to manage liquidity and payments."

"TxB’s ESG demand deposit product is an innovative complement to our existing suite of ESG finance solutions, enhancing our commitment to climate transition and inclusive growth," added John Goldstein, head of the Sustainable Finance Group at Goldman Sachs.

The new offering aligns with nine investment themes that underpin Goldman Sachs’ sustainability framework: clean energy, sustainable transport, sustainable food and agriculture, waste and materials, ecosystem services, accessible and innovative healthcare, accessible and affordable education, financial inclusion, and communities. Goldman Sachs’ sustainable finance commitment includes a target to deploy US$750bn across climate transition and inclusive growth by 2030.

 

Deutsche Bank acquires payment service provider Better Payment

Deutsche Bank is acquiring payment service provider Better Payment Germany, based in Berlin. Through the acquisition, Deutsche Bank says it will expand its market share in payment processing and acceptance. Over the next 12 months, Deutsche Bank will integrate Better Payment's technical solutions into its existing product range.

"Better Payment gives us broader market access in payment processing," said Kilian Thalhammer, head of Merchant Solutions at Deutsche Bank. "Thanks to the know-how of their employees, their existing dealer relationships and technical solutions, we can accelerate our growth in the German market, which is key to us. We will develop additional synergies by integrating the respective products from Deutsche Bank and Better Payments."

The bank plans to offer further banking and payment services via the existing Better Payment channels. Better Payment operates a service for the technical processing of online payments. For this purpose, the company uses a payment platform ( or online payment gateway) to carry out and receive online payments. The payment platform enables retailers - or their clients - to accept all common means of payment and to be able to receive all types of payment consignments. Better Payment offers its own online payment gateway as a white label solution to other companies and does not operate under its own brand. For these white label customers, payment processing is a useful addition to their own product portfolio.

This includes banks, financial service providers or SaaS providers who offer their customers the technology enhanced with their own services. In the business with white label solutions in particular, Deutsche Bank says it expects very high growth rates in the double-digit percentage range for the number of affiliated dealers over the coming years. Around 1,500 retailers are already using the company's payment platform. Contracts with existing customers remain unchanged.

 

CME Group launches sustainable derivatives clearing service

CME Group has announced the launch of what it says is the derivatives industry's first-ever Sustainable Clearing service to help market participants track and report on how their hedging activities are advancing their sustainability goals. The service will be available from 27 September 2021.

Sustainable derivatives encompass both the trading of products such as carbon offsets, battery metals and bioenergy as well as interest rate and foreign exchange futures hedging activity that is carried out to support a sustainable business.

"Sustainability continues to be an increasing priority for our global clients as they significantly expand both the risk management that they provide to green businesses and environmental projects," said Julie Winkler, chief commercial officer at CME Group. "This new framework for clearing sustainable derivatives will make it easier for our clients to measure the impact of their support for sustainable activities and can be part of the solution to encourage further growth in this key sector as the economy transitions to net-zero emissions."

All participating futures commission merchants will be provided with Sustainable Clearing eligibility criteria to identify and tag their sustainable trades. The eligibility criteria will be aligned to external standards, such as the International Capital Markets Association (ICMA) Social & Green Bond Principles. CME Group will be 'criteria neutral' to ensure that only independent third-party standards are applied.

The criteria and governance of Sustainable Clearing will be administered by CME Benchmark Administration Limited, an independent legal entity within CME Group, that manages and operates the company's benchmarks and indices. A robust governance framework and an inclusive criteria committee based on ICMA principles will ensure that Sustainable Clearing operates with integrity and transparency, staying close to relevant standards in the industry as they evolve and mature.

 

The crisis-fuelled digital transformation of commercial and corporate banking

The COVID-19 crisis dramatically accelerated the adoption of digital tools and channels among executives - a shift that has many implications for banks and their clients, including the potential for additional long-term consolidation for the industry. A new report from Coalition Greenwich analyses the impact of this surge in technology innovation and identifies the most important trends in digital banking for the remainder of 2021 and beyond.

Aggressive IT investments by the world’s biggest banks during the pandemic produced a surge in innovation. In a typical year, banks submit roughly 50 new digital platform features and functionality for review by the Coalition Greenwich Digital Transformation Benchmarking program. Over the past year, that number jumped to 254 and included 50 in the API/TMS/ERP category, 27 virtual account management solutions, 21 mobile apps, and 19 cash-forecasting tools.

Fintechs are also playing the role of equaliser by providing cost-effective, off-the-shelf products that enable banks with smaller budgets to deploy digital platforms to compete with national and global players.

The world’s biggest banks had the resources to continue IT investment programs during the crisis and have widened the capability gap between themselves and the smaller regional providers, many of which curtailed spending during the pandemic.

Best-practice banks now include marketing spend in their investment business cases to help ensure a rapid adoption and ROI. They are also increasingly coupling technology spend initiatives with broader external communication and marketing plans, reinforcing their status as innovation leaders.

Digital relationship management enablement tools allow relationship managers to target the right prospects, provide them with the appropriate contextualised insights for their specific client situations and efficiently execute on their routine tasks, allowing bankers to focus on client management, prospecting and cross-selling.

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