Financial institution Deutsche Bank and steel equipment manufacturer Primetals Technologies have established a framework linking ESG and currency risk hedging, Germany-based Primetals said Nov. 5.
The framework agreement enables Primetals to hedge its currency risk with forex options over a period of four years, linking them to sustainability targets.
“Measuring the success of our sustainability targets by our financial products illustrates the high regard for sustainable value creation at Primetals Technologies,” said Yoshiharu Ikeda, Chief Financial Officer of Primetals.
According to Primetals, financial products that meet ESG criteria have seen increasing demand as investors want to combine a return of profit more closely with personal or institutional values.
“As steel production accounts for up to ten percent of global greenhouse gas emissions, providers of decarbonization and automation solutions such as Primetals Technologies are at the center of this development,” Primetals said.
The sustainability targets include the proportion of total sales of projects sold that aim to reduce greenhouse gas emissions for customers, revenues relative to research and development expenditure that result in improved resource efficiency and promotion of a safe and healthy work environment.
At the end of July 2020, Deutsche Bank devised criteria for the classification of ESG financing, aligned to the new EU Taxonomy Regulation.
Any currency hedges executed by Primetals will need to meet the agreed targets and the company will have to pay a predefined sum to a non-governmental organization if it fails to do so.
External independent consultancy Environmental Resources Management will appraise and certify whether the targets are adhered to for the entire life of the option.
— Laura Varriale
