33656 - APRM II BNPP

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Summary of Investment Information

Project Number

33656

Company Name

RSF BNP Paribas Commodity Futures Limited

Date SPI Disclosed

May 2, 2014

Country

World Region

Region

Global

Projected Board Date

Jun 2, 2014

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Gbl Ind, Manufact, Agribus & Services

Industry

Financial Markets

Previous Events

Approved : Dec 11, 2014
Signed : Jan 5, 2015

Sector

Derivatives (Includes Risk Management Entities)

Project Description

BNP Paribas Commodity Futures Limited (“CFL”) provides investment business services in the United Kingdom. It trades commodity futures including electricity, emissions, natural gas, carbon, coal, freight, oil, bio fuels, and metals, as well as soft commodities, including coffee, sugar, cocoa, and grain products such as wheat, corn and soybean. The company was incorporated in 1989 and is based in London, the United Kingdom. CFL operates as a subsidiary of BNP Paribas and is part of BNP Paribas Commodity Derivatives unit that has branches and subsidiaries all over the world
The proposed 3 or 4 year’s transaction consists of up to US$100 million of un-funded IFC risk participation (the “Facility” or the “Project”) in a portfolio of margin financing facilities provided by BNPP to clients such as agricultural commodities traders, producers and consumers. This risk participation will support further growth in CFL client’s activities in emerging markets.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	100.0
Loan
Equity

Development Impact

The key development impacts are:
- Improved Access to Finance: By indirectly enabling emerging markets farmers and agricultural intermediaries across several countries to obtain price risk management products, the Project will facilitate their access to finance (since their lenders will be less exposed to factor price risk into their funding decisions).

- Relieve EM producers, consumers and intermediaries from the negative impact of margin calls on the liquidity position

- Increased Agricultural Production: Better access to finance for producers can be expected to lead to increased agriculture production, which in turn will have a positive effect on agriculture prices.

- More Stable Markets for agri-commodity Products: It is expected to enable producers, intermediaries and consumers of agri-products to enter into more stable and longer term contracts, lowering uncertainty and improving price stability/help address price volatility.

The Project will support agribusiness in emerging markets by increasing the volume of trades executed on exchanges for the EM producers, consumers and intermediaries.

IFC will be the only institution on the market offering risk sharing on margin calls financings that mitigate the credit risk of EM agriculture producers, intermediaries and consumers.

This Project can play a role in making agriculture price risk management products more widely available to emerging market entities by either enabling the provision of the liquidity needed by these entities when they deal in commodity exchanges or by supporting intermediaries who in turn provide agricultural price risk management products to Emerging Market entities.

Exchange-based derivatives for risk management products often carry up-front initial margins and on-going margin-posting requirements and therefore can have an adverse impact on the liquidity position of many agricultural producers, intermediaries and consumers. In this Project, IFC will be providing credit risk protection on CFL''s clients. Given the credit-intensive nature of funding margins on exchange traded derivatives exposure, CFL needs IFC''s credit enhancement to expand its offering of credit capacity to existing and new clients. IFC is playing an important role in broadening access to price risk management tools in emerging markets.

E&S Category Rationale / Risks and Mitigation

The project has been categorized as FI-3 according to IFC’s Environmental and Social Review Procedures. The project involves a risk sharing facility to cover the trade transactions of BNPPs counterparties; the transactions are mainly price hedging transactions at the commodity exchange with no direct touch-points to the supply chain. These transactions are not expected to have adverse environmental and social risks and impacts. The counterparties will be exchange traded derivatives client of BNPP meeting the Eligible Counterparty Criteria for this project and approved by IFC. The applicable requirements for this project are the Exclusion List and Eligible Commodities and Counterparty Criteria. It is noted that BNPP is an Equator Principles Finance Institution and the bank has CSR policies for assessing the E&S risks and impacts of transactions.

Key Mitigation Measures:

N/A

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