CME Group has launched 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, effective from 27 September.
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.
According to the group, 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, an independent legal entity within CME Group, that manages and operates the company’s benchmarks and indices.
According to the group, 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.
Julie Winkler, chief commercial officer, CME Group, says: “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.”
Sunil Cutinho, president, CME Clearing, adds: “Our solution ensures that all sustainable trades continue to benefit from our established risk management approach, including full margin offsets where applicable, which creates efficiencies for clients and end users."
