Embracing values-driven investment
While risk, liquidity and yield have been the traditional investment pillars, sustainability is fast becoming an essential fourth pillar. No longer are treasurers separating their organisational values from their decision-making, across a spectrum of environmental, social and governance (ESG) issues, not only for cash investment but trade finance too. Today, sustainable finance reflects a new way of investing that brings money and purpose together.
The time for sustainable finance
The trend for selecting investments that have strong ESG credentials was already apparent before the current pandemic, but the crisis has further fuelled this development. The financial markets are adapting rapidly to investor, and wider stakeholder investment preferences around sustainability. Green bonds, first issued in 2007, have been followed by social bonds, ESG, sustainability and SDG bonds to reflect the wider ESG agenda. Sustainability-linked and transition bonds were first launched in 2019 to offer investors more bespoke choices. Some commentators expect issuance of sustainable bonds to reach US$1 trillion in 2022.
The need for sustainable finance
Sustainability is at the heart of our decision-making at Standard Chartered, based on the United Nations’ Sustainable Development Goals (SDG). Together with governments, corporations, export credit agencies, development finance organisations and supranationals, we are investing in projects that help towards the SDGs and empower communities to grow their local and national economies. In addition, we are helping our corporate clients to achieve their own sustainability ambitions.
One of the ways in which we are doing this is through our trade financing solutions, such as supply chain finance (SCF) programmes. Strong ESG performance reduces supply chain risks, such as environmental pollution, labour disputes, corruption and bribery, and reliable natural resources supply. Consequently, many companies are working across their supply chains to improve ESG performance; however, this is not followed through into SCF programmes, and the terms under which supplier financing is offered.
Sustainability across ecosystems
We are therefore working with clients to build a sustainable trade finance proposition, which will in turn become a pillar of our overall sustainable finance commitment. This includes linking financing terms to the sustainability of goods and services, offering preferential terms to suppliers with strong ESG credentials as part of supply chain finance programmes, and supporting transitional industries, such as oil & gas and mining. Through these measures, we can help our clients achieve their own sustainability objectives, and use financing as a catalyst of greater sustainability across ecosystems.