The International Chamber of Commerce (ICC) has launched a set of principles to help banks and their clients classify trade finance transactions as sustainable.

There are currently no globally agreed regulatory standards on what constitutes sustainable finance, and regulators have signalled closer scrutiny of banks’ green finance claims over allegations of greenwashing.

Trade finance instruments are even harder to assess, the ICC says, “due to their nature as a ‘flow’ product without delineated projects”.

During the ICC’s ongoing work on developing a separate definition of sustainable trade, there was clear demand from the industry for “a bespoke, and separate, set of principles which provided a consensus view of what sustainable trade finance… should be and mean”, says Raelene Martin, the ICC’s head of sustainability.

The newly launched Principles for Sustainable Trade Finance (PSTF) “offer clear, transparent, and consistent guidelines to enable banks, corporates, and investors to effectively channel capital towards sustainable and inclusive trade finance facilities while mitigating the risks associated with greenwashing”, the ICC says.

Martin tells GTR: “The PSTF have been developed in collaboration with Boston Consulting Group, and with substantial input from leading trade banks over the last three months to ensure that they are actionable, implementable and relevant, whilst maintaining rigour.”

The ICC highlights contributions from Commerzbank, Deutsche Bank, HSBC, ING, Santander and Standard Chartered to the design of the PSTF.

The principles are divided into three product areas: green trade finance, sustainability-linked trade finance and sustainability-linked supply chain finance.

Products are divided between those in which the purpose of the financing is known and can be assessed, such as guarantees and standby letters of credit, which typically back project finance, and those where the purpose is not known so the goods must be assessed, including letters of credit and receivables financing.

The guidance also includes a list of activities that are considered green.

The PSTF are closely aligned with existing industry standards used by lenders to classify sustainable finance, such as the Loan Market Association’s principles on green loans and sustainability-linked lending.

The ICC is currently seeking feedback on the principles and aims to produce a final version of the principles before the end of the year.

The organisation, which is comprised of bank members and sets a range of standards and practice rules in trade finance, says it plans to develop a set of principles for social trade finance “in the near future”, noting the “nascence” of that product.

Separately, the ICC is continuing to craft principles for sustainable trade, through a series of pilot projects which began in 2022.

The push is partly in response to heightened regulatory pressure on banks to back up their green lending claims. Since May this year, the UK’s Financial Conduct Authority has required lenders to ensure their sustainability claims are “fair, clear and not misleading”.

The European Banking Authority has also highlighted a jump in the number of greenwashing allegations in the EU, including against banks.