Singapore’s largest bank DBS has rolled out what it says are the first financing and hedging solutions offered by a Southeast Asian-headquartered bank that are specifically tailored for the European Union  Emissions Trading System ( EU ETS ), one of the world’s largest carbon markets.

The bank’s offering, it says, allows corporates to more effectively manage their climate obligations while benefiting from stable access to EU carbon allowances ( EUAs ).

Designed by DBS’s emissions reduction business, the suite of financial tools, addresses both the working capital needs and hedging strategies of companies managing EUA inventories.

“As the pace of decarbonization continues to accelerate, the trading of emission allowances and voluntary carbon credits will grow in importance,” says Jacky Tai, the bank’s group head of trading and structuring for global financial markets. “They form part of a toolkit of mechanisms to incentivize businesses to reduce their carbon footprints and adopt cleaner technologies.”

The Singaporean lender, Tai adds, recently structured one of the market’s first repurchase agreements involving EUA collateral for the global commodities firm Trafigura. The financing vehicle move aided Trafigura by unlocking capital from its EUA holdings to manage the volatility of EUA prices, which have fluctuated between €50 ( US$56 ) and €98 per tonne over the past two years.

Remarking on the solution, Camille Treujou, global head of trade finance at Trafigura, states: “Innovative funding solutions are strategic in addressing the needs of a growing regulated carbon market. This facility enables us to further diversify our funding sources in order to support the development of our carbon trading desk in Europe.”