Strateggyz - CLN Green in Paris
In October, Strateggyz launched its CLN Green activity on the Paris market. Credit Linked Notes (CLN) are "synthetic bonds" issued by banks to transfer specific credit risks to investors. A CLN is structured instrument using a derivative called a Credit Default Swap (CDS). These credit derivatives allow investors to receive coupons linked to the non-occurrence of a credit event.
One of the benefits of CLNs is that they can offer investors a higher yield than conventional bonds for a relatively similar level of risk. Furthermore, they provide exposure to types of risk or underlyings that do not exist in the traditional bond market, such as credit index tranches. Given the flexibility of structured products, we can customize the maturity, leverage, currency and counterparty risk taken by the investor as well as the underlying risk. The latter can include the credit risk of a single company, a credit index (a basket of dozens of companies) or a credit index tranche.
With the help of a structuring desk at a leading London bank, CLNs exposed to the risk of corporate default are selected specifically according to their ESG performance as evaluated by the major ESG rating agencies (MSCI, S&P Global, Sustainalytics, ISS, CDP, etc.). Hence the name - CLN Green!
Above all, CLN Green is aimed at institutional investors and asset managers, who are looking to optimize their returns, better manage their risk and searching for a Green investment. I would even go as far as saying that this type of product is reserved for investors who are genuine believers in socially responsible green investments.
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