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A class of derivatives invented by pioneering derivatives guru and amateur crime novelist Hunter Barkley which Barkley formulated to allow alternative investment funds who had lazily committed to environmental, social, and corporate governance standards in their portfolio, not realising that investors would then object to their lucratively leveraged investments in firearms, narcotics, palm oil plantations and financial weapons of mass destruction.
Barkley’s idea was to write swaps laying off the risk of shame on those who could most easily bear it — namely the actual polluting, intoxicating, environment-wrecking corporates in the portfolio themselves. He overcame early objections that this was ridiculously circular by pointing out that so was debt value adjustment hedging, and that kept a phalanx of financial institutions out of technical insolvency — and their DVA traders handsomely remunerated — for a good three or four years after the worst excesses of the credit crunch. When people started to bridle at that — Could the Golden Crown Palm Oil Company of Sudan Pty Ltd really take its own turpitude back, and thereby exonerate each of its offshore fund shareholders of their ESG obligations? Barkley invented cross-entity “turpitude swaps”, where one natural wilderness gas fracking conglomerate could swap its regret and embarrassment at precipitating a series of minor earthquakes on the local Inuit with that of a Dutch distributor of poorly manufactured homemade pornography, thus creating a so-called “Turpitude Diffusion Event”.
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