HSBC has launched a new green finance instrument in the Middle East, North Africa and Turkey region that will help increase the short term sustainable funding options for banks and major companies and boost demand for green assets.
Partnering with Qatar’s QNB, this is HSBC’s first green repurchase agreement, or repo, globally. Repos are short-term money market instruments used by banks and major corporations to manage near term liquidity and funding needs.
The global repo market is worth an estimated US$13.4 trillion, according to data provider Finadium1, and connecting liquidity from the traditional repo market directly to green bonds and other related securities should help increase demand – and funding – for those assets.
“Launching a new green product is an important development for the bank and our clients, and further increases liquidity for the institutional green finance market,” said Antoine Maurel, HSBC’s Regional Head of Markets and Securities Services.
“As the Middle East and North Africa region prepares to host the next two global climate summits – COP27 in Egypt in 2022 and COP28 in the UAE in 2023 – HSBC is committed to developing the green finance options that will help our customers on their transition journeys to achieve their net zero goals.”
Abdul Hakeem Mostafawi, CEO of HSBC Qatar, said: “This transaction expands the range of green funding solutions we can offer to the market and partnering with QNB on the first green transaction of its kind for HSBC indicates the importance of Qatar and the Middle East to HSBC Group’s strategy – and particularly our ambition to help lead the transition to net zero.”
Noor Al Naimi, General Manager, Treasury and Financial Institutions QNB Group, the largest financial institution in the Middle East and Africa, stated: “The transaction underscores our continued commitment towards sustainability and environmental principles. This affirms our conviction that sustainability is a strategic imperative as we continue to work with counterparties to boost the sustainable finance ecosystem, and to elevate our green products and capabilities.”
The green repo sees HSBC borrow cash from QNB in exchange for ownership of green bonds. HSBC then allocates an amount equal to the purchase price to eligible businesses and projects that promote transition to a low-carbon, climate resilient and sustainable economy, and provide clear environmental sustainability benefits, with a focus on clean transportation.