Africa’s Standard Bank has been working with the International Chamber of Commerce’s (ICC) Banking Commission, co-leading a group tasked with equipping banks to encourage and finance sustainable trade practices.
The Johannesburg-based pan-African bank announced its work as the ICC marked its centenary at the ICC Banking Commission annual meeting in Beijing this week, where “an important milestone on the journey to achieve a globally accepted sustainable trade finance framework will be reached.”
For some time banks and corporates have faced a growing demand, from shareholders, customers, investors and other stakeholders, for their trade finance transactions to actively support the production of goods or services in a manner that, “minimises adverse environmental or social impact and reduces risk while also promoting environmental protection and social benefit,” says Nigel Beck, executive and head, environmental and social risk and finance, Standard Bank.
As Africa’s largest bank, operating across 20 markets in the region, “Standard Bank is acutely aware of the bio-diversity, human rights risk and broader complexity of operating as a financial institution in an emerging or developing environment.”
As a global bank linking international capital to African opportunity, Standard Bank is equally “alive to the pressures on global multinationals and other businesses to ‘green their supply chains’ - by meeting the growing social, economic and environmental expectations of consumers, global legislation and society,” says Vinod Madhavan, its head of trade.
In recognition of the central role of financial services in almost every transaction, interaction or business process, the ICC acknowledges that, “banking has an opportunity to drive global progress towards achieving environmental, social and governance (ESG) best practice through the development of an effective and broadly endorsed sustainable trade finance framework,” says Beck.
Standard Bank’s work with the ICC Banking Commission in co-leading a group tasked with equipping banks to encourage and finance sustainable trade practices has focused on:
- Providing clarity to banks on implementation of sustainability policy and standards through developing guidelines on sustainable trade finance operations;
- Promoting industry-wide consensus on a definition for sustainable trade finance. The aim is to discourage inaccurate use of the term and to prevent ‘greenwashing,’ a practice in which trade transactions are inaccurately labelled as sustainable without any means of verifying this;
- Monitoring and driving the development of industry initiatives around environmental and social risks and finance provision.
These goals were to be achieved across three work streams by:
- Creating guidelines for trade finance operations focusing on short-term trade finance. The guidelines will reference potential controls at the overall client as well as the individual trade finance transaction levels;
- Supporting a better understanding of the applicable voluntary standards, certification schemes and other approaches that can mitigate the ESG risks identified;
- Developing educational and training programs for trade finance professionals.
At this year’s ICC gathering, “it is our job to amalgamate these three work streams into a single framework that banks can use to consistently and accurately assess trade risk while developing appropriate responses that promote sustainable trade finance,” says Mr Beck.
As with the Equator Principles for Project Finance – now adopted by over 90 banks globally, “we expect that even if only a few banks start applying ICC best practice in sustainable trade finance initially, in a few years’ time as more banks commit to the process it will evolve into global best practice.”
Standard Bank’s direct involvement in assisting the ICC build an easy-to-use tool defining and enabling sustainable trade finance globally, “is part of our journey to embed our social, economic and environmental (SEE) framework into our product offering, ensuring that our lending decisions and business practices evolve in a way that produces value for clients and society at large,” says Beck.
The bank’s commitment to the ICC Banking Commission’s sustainable trade finance process dovetails exactly with the aims of the African Union’s Agenda 2063 which highlights the need for trade and investment infrastructure to connect Africa.
As an African bank clear in its purpose to drive Africa’s growth, partnering with the ICC to develop standards and rules in trade, in general, and universally adopted global best practice in sustainable trade finance specifically, “supports our purpose to facilitate trade and investment flows between African countries, and between African countries and global markets in a way that promotes sustainable and inclusive economic growth,” says Madhavan.
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