As banks and corporates grapple with regulatory and consumer demand for increased ESG practices in trade and trade finance, they face the need for independently scored transactions to overcome investor skepticism.
According to research by the Association of Investment Companies (AIC), investors are getting more discriminating about ESG, with more than half saying they are not persuaded by the claims being made.
As banks and corporates grapple with regulatory and consumer demand for increased ESG practices in trade and trade finance, they face the need for independently scored transactions based on predefined criteria from third-party vendors.
Trade finance technology platform provider Surecomp, following an invitation to pilot the sustainable trade framework proposed by the International Chamber of Commerce (ICC), has completed a successful automated ESG scoring and tracking pilot on its cloud-based, collaborative trade finance platform, RIVO, based on a dataset of more than 1,000 transactions covering more than 700 corporates, and hundreds of goods and trade routes.
The ICC laid out what constitutes a sustainable trade transaction, and a framework and assessment methodology to qualify trade transactions for this purpose. This framework delivers a simple score that makes it easy to see whether a transaction is sustainable or not.
By enabling financial institutions, corporates and shipping companies to connect to a range of ESG rating agencies, including Scope Group, Coriolis, WindWard and KYGTrade. Surecomp produced a comprehensive ESG score for each trade finance transaction.
Surecomp’s senior vice president of Strategy and Business Development, Enno-Burghard Weitzel, notes that giving companies and financial institutions access to real-time data enables them to make active ESG decisions. “An exporter can decide to move a shipping container, for example, to a ship that has a minimum ESG score.” According to Weitzel, this additional competitive element will help the entire trade finance ecosystem adopt more sustainable practices.
“The key feedback from both corporates and banks is more on the ‘what do we really want to do.’ The ‘why’ is clear. But the ‘what’ remains to be shaped,” Weitzel says. “The results of our pilot are a valuable input to the ICC working group on sustainable trade because we can prove the frontier of what’s technically doable on an automated basis. With this reality check, the framework can now be shaped to fit the users’ needs.”