HSBC Korea has completed the trade of Asia’s first sustainability-linked derivative product, a two-year, structured US$100 million ESG-linked cross-currency swap for Hana Financial Investment.

The transaction offers direct incentives for Hana to improve its environmental, social and governance (ESG) capabilities as part of the bank’s efforts to support the development of South Korea’s sustainable finance market.

The product’s economic terms are directly linked to a specific ESG key performance indicator (KPI), with the achievement of the target by maturity enabling the firm to receive a premium payment or discount. In this case, the KPI involves the parent group’s ESG risk rating as set by Sustainalytics, a leading ESG rating company.

Eunyoung Jung, president and chief executive officer of HSBC Korea, says: “With this ESG derivative, market participants will be able to enjoy a much wider and flexible range of sustainable finance products. It is another testament to HSBC’s commitment to a sustainable future, and part of its strategic efforts to open up a world of opportunity for its customers.”

As one of the global banks supporting efforts towards net zero emissions, HSBC has committed to phasing out the financing of coal-fired power and thermal coal mining by 2030 in EU and OECD markets, and in other markets by 2040. It also pledged to facilitate US$750 billion to US$1 trillion of financing and investment to help clients with their transition.