Sam Mathew, Global Head of Documentary Trade, Standard Chartered
Businesses have recognised the real need to put sustainability on their agendas in the last decade or so. Many initiatives have sprouted and concluded in some shape or form – but the rate of climate change still far outpaces these. There is much that corporates and financial institutions can do in working with their supply chain ecosystems to assess, improve and continue pushing for actionable outcomes if we are to make the impactful changes we need to see.
Addressing the challenge
Businesses have traditionally been best placed to play, and have played, a big role in advocating sustainable practices through their value chain. Many have embraced the UN Sustainable Development Goals (SDG), with commitments made to source and produce sustainably while also cascading change through their supply chains.
When we look at financial institutions, one of the biggest impacts that a bank can have to positively influence environmental and social outcomes is through the type of businesses they finance.
Like us, a number of banks have embedded environmental, social and governance (ESG) checks during the client onboarding process, limiting exposure to operations and assets that deviate from sustainable philosophies.
Specific to trade, we’re seeing innovative solutions such as Project Trado, a blockchain initiative which served to extend financing much earlier in the supply chain to smaller Malawian smallholders supplying tea to Unilever. The platform enabled traceability and provenance of the origins of the sustainably produced tea, and provided potential financing of these flows for this group of tea smallholders.
The need for a concerted effort
Whilst there has been good momentum in the push to drive sustainable trade across the value chain, there are various challenges yet to overcome.
In this current world of rising trade barriers and protectionism, more could be done to also simulate and incentivise sustainable goods rather than tariffs based on where they originate from. Sustainable sourcing may come at a premium, and companies or enterprises that are committing to implement sustainable trade practices would do well to be supported by policies that will help actualise its commitments.
The provision of financing is the bread-and-butter of wholesale banking institutions, and sustainable financing presents a real opportunity for banks to finance projects that commit to sustainable trade. Most banks tend to now look at enterprise risk which covers reputational and sustainability frameworks, and have these checks embedded in their client due diligence procedures. More can be done in this space at an industry level to establish common standards for financing of sustainable assets.
With the sustainable trade and trade finance industries still evolving, we can expect to see more initiatives that amplify sustainable finance in the years to come. What would make a significant impact however, is for the entire ecosystem – corporates, banks and public sector institutions – to come together and make a concerted push to drive impact in areas where it matters most.
That may be in the form of subsidies, incentives and the use of technologies such as blockchain for provenance and tracking of sustainable shipments – ultimately this is what we all need to work towards.
This article was also published in World Trade Matters: https://www.export.org.uk/page/WorldTradeMatters