ICC Principles for Sustainable Trade and Trade Finance: Enhancing Resilience and Sustainability in Global Trade

Strategic Insights -

As trade plays a vital role in driving economic growth, connecting markets, and supporting development, it must also prioritize sustainability. The International Chamber of Commerce (ICC) has addressed this challenge by launching the Principles for Sustainable Trade and Trade Finance, providing a framework to assess sustainability in international trade and trade finance. These principles are designed to ensure that global trade aligns with the goals of the Paris Agreement and mobilizes the necessary finance to achieve them. The ICC has developed these principles in collaboration with major trade banks, aiming to fill the gap in existing practice within the financial sector.

Key Takeaways:

  • The ICC Principles for Sustainable Trade and Trade Finance provide a framework to assess sustainability in international trade and trade finance, considering four key components: use of proceeds, seller, buyer, and distribution, against two critical dimensions: environmental and socio-economically sustainable development.
  • The principles include high-level principles for banks to utilize, guidance on methodology, and a framework for nuanced sustainability assessments based on sector-specific evidence.
  • The Sustainable Trade Finance Principles, in its second iteration (Wave 2), include the Principles for Green Trade Finance (PGTF), Principles for Social Trade Finance (PSoTF), and guidance on Sustainability-linked Trade Finance.
  • The ICC developed the first-ever industry taxonomy to define what constitutes a sustainable trade finance transaction, filling a major gap in existing practice within the financial sector.
  • A pilot scheme was launched in the textiles industry to test the framework on real transactions, and a new version, Wave 2, has expanded scope, added rigour, and improved usability.

Statistics:

  • The ICC has developed the first-ever industry taxonomy to define sustainable trade finance transactions.
  • The Principles for Sustainable Trade and Trade Finance framework assesses four key components against two critical dimensions.
  • Wave 1 of the framework was launched in November 2022, and a pilot scheme was launched in the textiles industry in the same year.
  • Wave 2 has expanded the scope to include three new sectors, added a granular grading system, and incorporated machine-readable sources of evidence.
  • The ICC launched a positioning paper on Standards for Sustainable Trade and Trade Finance in collaboration with BCG and leading trade banks in 2024.

Sources:

  • MIL-OSI Publisher, International Chamber of Commerce, "ICC Principles for Sustainable Trade and Trade Finance"
  • Learn more about the Principles for Sustainable Trade (Wave 2) (2023)
  • Learn more about the Principles for Sustainable Trade (Wave 1) (2022)
  • Positioning paper on Standards for Sustainable Trade and Trade Finance (2021)