ISDA launches derivatives clause library linked to sustainability
18 January 2024 US
Image: LuckyAi
The International Swaps and Derivatives Association (ISDA) has launched a clause library for sustainability-linked derivatives (SLDs).
The new offering is designed to provide standardised drafting options for market participants to use when negotiating SLD transactions with counterparties.
SLDs embed a sustainability-linked cashflow in a derivatives structure and use key performance indicators (KPIs) to monitor compliance with environmental, social and governance (ESG) targets.
The ISDA SLD Clause Library provides drafting options in multiple areas, including provisions stipulating what evidence of sustainability performance must be delivered and when.
It also includes mechanisms to adjust cash flows depending on whether relevant ESG targets have been met, and options available to counterparties following disruption and review events.
Commenting on the new offering, Scott O’Malia, chief executive of ISDA, says: “SLDs are highly bespoke transactions, but the language that describes the terms and the objectives does not have to be.
“The ISDA SLD Clause Library is designed to eliminate unnecessary differences and bring greater standardisation to this market. This will bring more efficiency to the negotiation process and reduce risks, setting the foundations for this market to develop further.”
The new offering is designed to provide standardised drafting options for market participants to use when negotiating SLD transactions with counterparties.
SLDs embed a sustainability-linked cashflow in a derivatives structure and use key performance indicators (KPIs) to monitor compliance with environmental, social and governance (ESG) targets.
The ISDA SLD Clause Library provides drafting options in multiple areas, including provisions stipulating what evidence of sustainability performance must be delivered and when.
It also includes mechanisms to adjust cash flows depending on whether relevant ESG targets have been met, and options available to counterparties following disruption and review events.
Commenting on the new offering, Scott O’Malia, chief executive of ISDA, says: “SLDs are highly bespoke transactions, but the language that describes the terms and the objectives does not have to be.
“The ISDA SLD Clause Library is designed to eliminate unnecessary differences and bring greater standardisation to this market. This will bring more efficiency to the negotiation process and reduce risks, setting the foundations for this market to develop further.”
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