Just 4% of large US corporates demand expertise in sustainable trade finance from their banking partners, leaving lenders “puzzled” by the lack of interest from customers, researchers have revealed. 

US banks have invested millions of dollars in developing environmental, social and governance (ESG) lending practices, believing that fresh products and services would be needed to meet growing demand from larger customers. 

“That demand has not yet materialised, much to banks’ surprise,” says Coalition Greenwich, a financial services information provider that forms part of international analytics company CRISIL. 

“About 80% of US companies have established some organisational ESG goals. However, despite the widespread adoption of ESG standards, ESG currently plays little to no role in companies’ selection of providers of corporate banking services like cash management and trade finance.” 

The findings follow a survey of hundreds of individuals working in corporate banking, cash management and trade finance. In the case of trade finance, participants were selected from companies with at least US$2bn in annual revenue. 

Just one in 25 such companies demand sustainable financing expertise from their bank, while in cash management, just 2% of respondents say a bank’s commitment to ESG plays any role in selecting a provider – down from 9% in last year’s survey. 

Coalition Greenwich suggests banks have been taken aback by the lack of corporate demand, noting that European banks “need robust ESG platforms to compete for corporate banking clients”. 

However, it says there are signs corporate demand could shift, and urges banks to continue pursuing ESG improvements. 

In March last year, the US Securities and Exchange Commission (SEC) proposed rule changes requiring businesses to disclose details on their climate-related risks, including greenhouse gas emissions. 

The proposals include requiring disclosure of scope 3 emissions, covering upstream and downstream activities across a corporate’s entire value chain, if that company has set related targets. The move echoes efforts underway at EU level, which would apply to US companies operating within the bloc. 

In the US, however, progress on finalising the reforms has been slow. In May 2022, the SEC extended the comment period on its proposals until June, and as of press time continues to receive responses, including 15 since the start of December. 

Economist Rebecca Harding, founder of trade finance consultancy Rebeccanomics, points out that ESG is “highly politicised” in the US, and so moves to mandate climate-related reporting are continuing to prove controversial. 

“Even if SEC moves are successful, mandated reporting will only apply to the very largest listed corporates,” she tells GTR. “As a result, initiatives… are unlikely to be widely adopted outside those organisations which must comply with those standards for accreditation reasons or who are heavily exposed to EU regulations.” 

Despite the drag on legal reforms, US corporates are expected to face growing pressure from elsewhere to prioritise ESG improvements, including from shareholders, customers and investors. 

A “sizeable number” of shareholder proposals have been passed that relate to sustainability, as well as diversity, equity and inclusion, with more expected to follow, Coalition Greenwich points out. 

Consumers are also increasingly conscious of climate-related issues when making purchases, subjecting companies’ supply chains to greater scrutiny. 

And as ESG funds grow in size, sustainability will have “an increasing influence on share price and company valuation”, Coalition Greenwich says. 

As a result, US lenders that have already invested in ESG “should stay the course”, it argues. 

“They should be working to help companies in their ESG journeys by providing financial incentives for adoption, overall education and advice, counsel on future regulatory actions and their impacts, and specific ESG products and services,” the report says. 

“Just as importantly, they should continue communicating to their clients about the growing importance and potential benefits of ESG, and reminding clients that they are there to help.” 

The recommendations come as analysts expect large US corporates to be more selective when it comes to their banking services providers. 

Historically, companies “start consolidating their banking lists if and when they see signs of a recession in the year ahead”, Coalition Greenwich says.  

“Half of large US companies expect to shift some of their banking business from current providers in 2023. That share is likely to increase if an economic recession drives companies to fortify their access to credit.”

The report finds that JP Morgan and Bank of America hold the largest share of the US trade finance market, with 55% and 42% of total relationships respectively. JP Morgan is named as a “quality leader” for trade finance, while both banks share the same distinction for cash management and large corporate banking.