Arancha Díaz-Lladó, Chief Sustainability Officer at Twinco Capital, outlines her thoughts on the power of sustainable supply chain finance.


The publication in 1941 of Stefan Zweig’s Brazil. A Land of the Future was met with both great interest and harsh criticisms. Many reviewers thought that Zweig’s vision of the country was too naïve, unrealistic and utopian.

After years of discussion and widespread enthusiasm on the opportunity of sustainable supply chain finance to improve ESG credentials of supply chains, there are few cases of successful financial schemes, and even these have not turned into widespread application of the model. As it was with Zweig’s vision of Brazil, could it be that we too have been unrealistic and impractical to think of finance as the panacea to improve supply chain performance in sustainability?

At Twinco Capital, we are firm believers that extraordinary events such as those of the past two years have contributed to build the momentum to, finally, unlock the power of finance and tackle a pain point for big corporates all over the world: sustainable supply chain management.


World trade in turmoil

One could argue that we are facing three combined crises that are disrupting global trade flows. One, a transport crisis, due partly to imbalances caused by Covid-19 such as changes in consumption habits or saturated capacity in ports. Two, a raw materials crisis, which particularly affects basic technological products such as microchips. Three, an energy crisis that has caused an unprecedented increase in the price of electricity, gas and fuels. We have all the ingredients for a perfect storm; a storm that will most likely be magnified by the war in Ukraine, which is already creating severe disruptions to global trade flows.

This perfect storm, which is causing unprecedented disturbances in supply chains around the world, is wreaking havoc for small and medium-sized companies and increasing pressure on large corporations, which urgently need to address the issue of sustainable management of their supply chains and due diligence processes.

Supply chain management itself encounters two main initial hurdles: on the one hand, traceability of supply chains and the complexity of cross-border relationships of global suppliers distributed throughout the world; and, on the other, the increasingly intricate network of national and international ESG standards and regulation. If we add to these hurdles the complexity of aligning internal incentives of procurement, finance and sustainability, it should come as no surprise that progress in responsible supply chain management is still limited when compared to other areas of ESG management.

Confronted with this situation, corporate buyers are eager to find solutions, particularly as they face growing regulatory pressures and increasing requirements of customers, investors and other interest groups, which legitimately ask for more information on social and environmental impacts of the supply chain.

It is urgent to find levers to push forward sustainable supply chain practices.

The momentum for supply chain finance

The potential link between ESG performance and trade finance to help both suppliers and buyers progressively improve their sustainability credentials has been debated for many years. In fact, the 2030 Agenda for Sustainable Development itself recognises international trade as an engine for inclusive economic growth and poverty reduction, and an important means of achieving the Sustainable Development Goals (SDGs).

The design of buyer-led financing programmes properly structured around ESG objectives can make a decisive contribution to moving forward. So far, nothing new. Beyond theory, at Twinco Capital we believe that there are three fundamental aspects that can move the needle to address this challenge.


The need for new trade finance solutions

First, we need to rethink the scope of traditional trade finance instruments. Most solutions are limited to addressing the moment an invoice is produced. It is vital, however, that financial instruments cover the entire production process. Suppliers need to access affordable working capital early in the production cycle, that is, when they receive a purchase order from a client. It is at this point when funds are most needed, to buy raw materials and start producing the goods. It is also at this point when access to affordable financing is most difficult and expensive, and most acutely for SMEs in emerging economies.

This is precisely the idea that is behind Twinco Capital: we are the first company to offer a supply chain finance solution that includes purchase order funding. Our aim is to fund trade more efficiently and deliver the next generation of supply chain finance.


Technology, data analytics… and sustainability

A way to achieve this brings us to the second game-changing factor: technology and data. There is greater value in the intersection of digital technologies, data and sustainability. It is possible to use advanced data analytics to better discern between suppliers and assess risk more accurately, going beyond a short-sighted view of a supplier’s profit and loss and balance sheet accounts when deciding whether they are creditworthy. Finance providers need to incorporate into the risk equation operational and sustainability data from disparate sources, combining outside-in and inside-out perspectives and looking at both risk exposure and management. The idea is to progressively integrate relevant data feeds to ensure a holistic appraisal of risk that includes supplier performance, buying practices, the product itself, and logistics data.

At Twinco, we believe that the combination of data, technology and sustainability in trade finance can help supply chains adapt the rigid systems of the past to a variety of unpredictably evolving challenges and address the massive trade finance gap (over US$1.7tn in 2020 according to the Asian Development Bank) that the Covid-19 crisis has exacerbated.


New solutions and bold moves

This is easier said than done. Would it not be remarkable if we had all this ESG data readily available and organised to be used in our data feeds? The truth is this is not yet a reality, and there is still a long way before we get there. Nevertheless, we have seen some progress. The European Commission’s efforts to define what sustainability is and what it is not might provide some guidance. We just hope that this guidance is not obscured by the complex package of regulatory proposals that is being prepared under the EU Green deal. In addition to this, the crowded space of ESG standards and frameworks is moving, albeit annoyingly slowly, towards improving consistency and comparability.

Finally, and this is probably the best piece of news, everywhere we turn to, we find interesting initiatives in the field of sustainability and data. The Social Hotspot Data Base (, for instance, aims to provide tools both for buyers and suppliers to assess sector-specific risks and opportunities in responsible supply chain management. The sustainability map ( helps to navigate the constantly moving landscape of sustainability standards.


Twinco Capital: delivering the next generation of supply chain finance

At Twinco Capital, we leverage the value of technology, data analytics, sustainability and finance to deliver the next generation of trade finance and build a network of competitive, trustworthy and ESG performing supply chains. We are the first company to offer a supply chain finance solution that includes purchase order funding, and we want to be the first to have a model in which ESG factors are fully integrated.

Our aim is to move from a negative approach, in which the burden of complying with ESG standards lies on suppliers, often excluding them from international trade opportunities, to a positive approach, where ESG performance can lead to preferential pricing in trade finance. This is the kind of scheme that we are developing together with our clients: buyer-led programmes that offer pricing differentials in purchase order funding based on specific, transparent and measurable ESG targets. We believe that such a breakthrough in trade finance offers an unparalleled opportunity to foster competitive global production networks and empowers companies to be the engine of inclusive growth and improved livelihoods.

Change happens when corporations think differently. At Twinco, we believe that we can be a key actor to facilitate this new thinking. Together with our clients we have a colossal capacity to drive change, and the time to do so is now. Sustainable supply chain finance, like Brazil, is not a thing of the future, but a reality today and a huge opportunity to foster positive social and environmental impact.