Sibos 2022: green shift in guarantees

Demand for green guarantees continues to rise, particularly across Europe and Asia, as businesses increasingly seek to embed sustainability aims into their financing. 

At ANZ, that demand has in some cases already grown beyond just replacing existing business, and is finding new business attracted to the sustainability element, according to Head of Guarantees Product Sally Robinson.

A green guarantee is a bank guarantee that supports eligible green projects, assets or purposes.

“We now have green guarantees available in several markets across our institutional business,” Robinson told Institutional Insights. “We've seen rising interest from around the world, mainly out of Asia and Europe.”

In late 2021, ANZ announced it would provide green guarantee products to its customers, describing it as a “natural evolution” of the bank’s existing sustainable finance capability in the loan and bond market.

ANZ has also seen rising demand for sustainability-linked guarantees, Robinson said. Here, guarantee pricing is tied to the performance of pre-agreed sustainability targets, incorporating a company’s sustainability strategy into their financing.

“We're seeing quite significant demand out of our financial institutions business for that product,” she said. “And the interesting part is that it's not replacing existing normal lines, it's actually new business.”

Market shift

Hari Janakiraman, Head of Industry & Innovation, Transaction Banking at ANZ, said rising demand for sustainable trade instruments is due to a range of factors, including shifting regulatory expectations.

Businesses are increasingly looking to link decarbonisation and sustainability targets, and commitments of net zero by 2050, to their financing, he said.

“Customers are coming to us and saying ‘we want to use sustainable finance products’,” Janakiraman said. That has inevitably led to increased competition as the market continues to grow.

Robinson said ANZ’s trade product team had built a strong working relationship with the bank’s sustainable finance business, helping build “…trust and close dialogue” with customers around structuring sustainable trade finance solutions.

“You can see an energy and a shift occurring at ANZ, and in financial services, where we're thinking about sustainability at customer level rather than just transactional level,” she said. “That's a market shift now.”

Slightly ahead

High levels of competition and greater exposure to sustainability demands in Europe and Asia have created an advanced market for sustainable instruments. ANZ’s home markets are “slightly different,” Robinson said.

“These larger markets are much more across the idea of green products,” she said. “In those countries you see banks leading with sustainability in their conversations with customers.”

This reflects slightly more advanced comfort levels toward sustainability among regulators, the general business community and even consumers, according to Robinson.

“It feels like they're just a few years ahead of us,” she said. “And it’s no wonder, then, that the banking system is able to actually leverage that advancement.”

But the faster rate of acceptance in those regions serves as an opportunity for markets like Australia to discover best-practice approach.

“We can look and watch and learn,” Robinson said. “I think that’s good for us, actually.”