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November 1, 2022

ESG seeps into $15tn repo market

Few may be familiar with the ‘repo’ market, the space where repurchase agreements are traded. Essentially, these are collateralised short-term loans, where one party sells a security and agrees to buy it back at a later time and at a higher price. (The security is the collateral, and the difference in price represents the interest on the loan.)

It is a relatively obscure market, with a pretty large size. Though it has contracted since the financial crisis (here an analysis on that) the International Capital Markets Association estimates that a total €15tn ($14.9tn) agreements are outstanding globally, and €3tn are traded daily.

Naturally, ESG has found its way to this space too. ICMA has recently published a report to explain and categorise how sustainability is present in the repo market, both in terms of wider principles and specific sustainability-related products that have emerged in the market.

It also aims at preparing the basis for future guidance. Interesting report for the geekiest of finance geeks, and for the rest of us too.

Read the report

A service from the Financial Times