Deutsche Bank announces custody, clearing and settlement service for carbon credits
Deutsche Bank today announced it has initiated a custody, clearing and settlement service for carbon credits. The service facilitates the exchange of carbon credits among carbon investors and other participants in the carbon trading market and provides an integrated custody and safekeeping service. The service will cover carbon credit instruments issued under both the European Union Emissions Trading Scheme and the Clean Development Mechanism set up under the Kyoto Protocol.
Deutsche Bank’s service has significant advantages for energy and industrial firms, financial institutions and others active in the carbon trading market:
- It significantly reduces the settlement risk associated with current carbon trading practices by settling carbon credits simultaneously against cash.
- It relieves investors and traders of operational responsibility for the settlement process.
- It facilitates rapid settlement by providing a single platform for holdings across multiple currencies and markets.
- It manages the limit on credits that can be transferred from a country other than the client’s host country under the EU Emissions Trading Scheme (Article 17 risk) by tracking a client’s carbon credit holdings and allocating them to the different national carbon “registries”.
- It offers custody as well as settlement and clearing, thus providing clients with a streamlined process similar to that of more traditional asset classes.
Deutsche Bank will leverage the proven infrastructure of its Depositary and Clearing Centre in London for this service. The Depositary and Clearing Centre currently provides a range of custody, clearing and settlement services for London Money Market instruments and provides safekeeping services for Europe’s largest International Central Securities Depository, the largest depository in the US and the London Metal Exchange. The new carbon credit clearing and custody service will therefore be provided in a proven control environment with well-established systems and processes and experienced staff.
Dinkar Jetley, Global Head of Trust & Securities Services/Cash Management Financial Institutions at Deutsche Bank, said, “We are providing a streamlined, risk-free way of holding and trading carbon credits and associated instruments. We believe the provision of a single professionally managed platform will significantly increase activity in this market and provide additional capacity for the expected growth in the trading and banking of carbon credit instruments.”
The global carbon trading market was created as a result of the passage of the Kyoto Protocol whose aim is to reduce greenhouse gases worldwide by setting emission reduction targets for the countries that ratified it. The European Union has its own regional Emissions Trading Scheme consistent with the principles of the Kyoto Protocol for the reduction of CO2.
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Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 77,920 employees in 76 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.
Deutsche Bank’s Trust & Securities Services business, part of Global Transaction Banking, is one of the leading providers of trustee, agent, depositary, registrar, SPV management and related services for a wide range of debt financings including bonds, medium term note and commercial paper programs, asset backed and mortgage backed securities, collateralized debt obligations, project financings, escrows and syndicated loans. It is also one of the leading depositaries for American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs), and, through a fully integrated network of specialist offices worldwide, provides domestic custody services in 28 securities markets.