ICC Launches Landmark Sustainable Trade Finance Framework to Combat Greenwashing

The International Chamber of Commerce (ICC) unveiled its new Principles for Sustainable Trade Finance (PSTF) at Sibos 2024 in Beijing in effort to fight against greenwashing in global trade. The framework, developed in collaboration with leading financial institutions and Boston Consulting Group (BCG), addresses the critical challenge of evaluating sustainability in trade finance products.

The new framework, representing Wave 2 of ICC's sustainable trade principles, introduces a sophisticated evaluation matrix across four components of trade transactions: use of proceeds, seller, buyer, and distribution. Each component is assessed against both environmental and socio-economic development criteria, aligned with the Paris Agreement's 1.5°C temperature rise limit and the UN Sustainable Development Goals.

Features of the Framework include:

• Four distinct sections covering Green Trade Finance, Sustainability Linked Trade Finance, Sustainability Linked Supply Chain Finance, and Social Trade Finance
• Expanded scope beyond textiles to include energy, agriculture, and automotive sectors
• Enhanced grading system facilitating automation through machine-readable evidence sources
• Integration of ESG scores and existing industry standards
• Comprehensive assessment of transportation sustainability in trade transactions

The initiative has garnered support from major financial institutions, including HSBC, Standard Chartered, Deutsche Bank, Santander, ING, and CommerzBank, ensuring broad industry relevance and practical applicability.

ICC has initiated an open consultation period and will host a virtual launch event on October 29, 2024, at 13:00 CET. The session will include a detailed walkthrough of the principles and a Q&A segment with the framework's authors and contributors.

The principles aim to bridge the finance gap for sustainable projects while providing investors with clearer criteria for evaluating sustainable trade opportunities. Stakeholders are encouraged to participate in the consultation process through an online survey and the upcoming virtual launch event, with the final version of the framework scheduled for release later this year.

This initiative marks a significant step forward in the financial sector's commitment to environmental and social governance, providing a standardized approach to sustainable trade finance that has been notably absent in the industry.

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