Exchange in Focus: CME Group Launches First-Ever Sustainable Derivatives Clearing Service

21 September 2021

Companies are increasing their sustainable hedging activity, defined as both the trading of exchange-traded derivatives such as carbon offsets, battery metals, and bioenergy, as well as hedging activity with interest rate and foreign exchange futures to support ESG initiatives.  Following the needs of the market, CME Group has announced the launch of 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.  “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, 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.”  How Sustainable Clearing works All participants will be provided with Sustainable Clearing eligibility criteria to identify and tag a sustainable trade. The eligibility criteria will be aligned to external standards already published, such as ICMA's Social & Green Bond Principles. CME Group will be criteria neutral to ensure only independent third-party standards are applied. Types of Sustainable Clearing transactions “This innovative clearing offering makes it simple for firms to track their sustainable derivatives positions by seamlessly integrating reporting into their existing workflows,” said Sunil Cutinho, President, CME Clearing.  “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.”   

Key benefits and applications

Transparent reporting; Independent oversight instills credibility; No additional impact; Easy to implement    

Owain Johnson, Managing Director, Global Head of Research & Product Development at CME Group, discusses Sustainable Clearing - a new ESG reporting solution.

The service will be available from September 27, 2021. For more information on Sustainable Clearing and details on how trades will be defined and allocated please visit: Sustainable Clearing at CME Group

An action menu for derivative exchanges to promote sustainable development

In response to the growing appreciation of planetary boundaries and social imperatives, policymakers, regulators and private sector actors are placing greater emphasis on the need to achieve environmental and social sustainability. Derivatives exchanges are an important part of the overall solution, whether as providers of relevant products and services, contributors to greater data availability and transparency, or as conveners of the market to address barriers to change. SSE initiative and the WFE jointly published guidance on How derivatives exchanges can promote sustainable development' which provides an overview of the role of derivatives markets generally, presents some of the things derivatives exchanges are already doing in relation to sustainability, and highlights ways in which these exchanges can support the transition to more sustainable development pathways.

About the SSE

​The SSE initiative is a UN Partnership Programme organised by UNCTAD, the UN Global Compact, UNEP FI and the PRI. The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals. The SSE seeks to achieve this mission through an integrated programme of conducting evidence-based policy analysis, facilitating a network and forum for multi-stakeholder consensus-building, and providing technical assistance and advisory services.