OCBC Bank, RHB Banking Group collaborate on two sustainability-linked solutions

This is OCBC’s first sustainability-linked derivative transaction with a Malaysian financial institution.

OCBC Bank O39 and RHB Banking Group have entered into a two-year $150 million sustainability-linked loan and cross-currency swap between OCBC and RHB Bank Malaysia, the banks announced on May 2.

In addition, OCBC has extended a $100 million sustainability-linked loan to RHB Bank Singapore.

This is OCBC’s first sustainability-linked derivative (SLD) transaction with a Malaysian financial institution, but the second for RHB, following its successful structuring of Malaysia’s first green cross-currency swap in 2021.

The cross-currency swap will be used to hedge the currency risk coming on the back of the underlying $150 million sustainability-linked loan with RHB Malaysia.

This facility will allow RHB Malaysia to convert its Singapore dollar-denominated proceeds to US dollars at a competitive rate and, at the same time, hedge USD/SGD currency exposure for the duration of the swap.

OCBC has pledged to grow its sustainable finance portfolio to $50 billion by 2025. These two solutions will add to the bank’s sustainable financing portfolio, which reached $44 billion at end-2022.

Tan Yuen Siang, head of global financial institutions, global commercial banking, OCBC Bank, says: “We are glad to support RHB Banking Group with their sustainability goals while providing a competitive swapped USD rate, expanded funding choice by tapping on the liquid SGD bank market, and the ability to hedge foreign currency exchange risk with a cross currency swap.”

Tan adds: “As we strengthen our foothold in Asean, which is expected to continue to register economic growth in 2023 despite global headwinds, we will continue to expand our suite of innovative product offerings to support our regional customers’ evolving business needs and sustainability ambitions.”

According to the banks, both transactions were structured in a way that promote and drive impactful sustainable business practices, as they allow RHB to enjoy better rates if it meets the agreed sustainability performance targets in two key metrics. The targets are set around RHB's S&P Global Corporate Sustainability Assessment score, as well as its sustainable finance services and commitments. RHB scored 49/100 in the S&P Global Corporate Sustainability Assessment last year, an improvement of two points from 2021.

Angus Salim Amran, group treasurer of RHB Banking Group, says: “We are delighted to collaborate with OCBC Bank on these two sustainability-linked transactions. This collaboration further reinforces RHB Banking Group’s commitment in providing end-to-end sustainable financing solutions for our customers, as well as increasing the depth and breadth of the ESG funding and derivatives market in both Malaysia and Singapore.”

As at 10.45am, shares in OCBC are trading 4 cents higher, or 0.32% up, at $12.62.

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