The International Chamber of Commerce (ICC) has broadened its trade finance sustainability standards to include three high-risk sectors, a major step in its plans to develop a global benchmark for measuring the sustainability of trade transactions.  

The ICC first launched the Principles for Sustainable Trade in 2022 through a pilot project in the textiles industry. This week it released an update to the standards informed by that work, which are being applied to a new pilot in the energy, automotive and agriculture sectors that began in October.  

There is already a patchwork of widely accepted standards for assessing the sustainability of products such as bonds and loans, but they are difficult to apply to trade transactions, the ICC says. Once fully developed, it hopes its principles will fill that gap and be used globally.  

The expansion to the energy, automotive and agriculture sectors applies the standards for the first time to activities at the heart of the climate crisis: the production, trading and burning of fossil fuels; combustion-powered and electric vehicles; and the environmental impacts of food production.  

“Trade must transform itself into an engine for the implementation of the Paris Agreement and for sustainable development,” ICC Secretary-General John Denton says. “It must also become a facilitator of sustainable practices across international, sectoral and enterprise levels.” 

“The growing interest in ESG provides a beacon of hope for change; yet this interest brings with it a greater demand for precision and clarity on what constitutes sustainable international trade and sustainable trade finance. We hope that the evolution of our Principles for Sustainable Trade will provide a platform to deliver on this imperative.” 

The ICC also wants the standards to unlock more access to finance for sustainable businesses and projects, and to boost investment in trade finance assets by allowing providers to demonstrate sustainability against a widely accepted benchmark.  

Feedback from wave 1 participants made public earlier this year was largely positive, but many wanted a more simplified process. 

In a paper published this week the ICC says feedback from the participants in wave 1 helped inform the shape of the latest iteration of the programme, such as simplifying some definitions and expanding the standards to encompass the physical transport of goods.  

The new rules also incorporate emerging regional sustainability taxonomies and make the assessment methodology more adaptable to automation. Granular grading calculators have been developed for participants in the latest pilot.  

The wave 2 processes include a combined assessment of the impact of a transaction on climate and nature, but the ICC says it hopes the final standards will include a separate measurement of impact on nature, as more national policies on biodiversity become available.

It remains unclear when final principles, or what the ICC refers to as a “target state”, will be finalised.  

The paper says wave 2 “still represents a ‘transition state’, and there remain gaps which we will address in future iterations”.  

“The goal is wide sectoral/industry coverage and broad buy-in from key stakeholders –  including financial regulators,” says ICC global policy manager Tomasch Kubiak, in response to questions from GTR. He says the organisation is also “looking to enable automation of the grading, so that it can be applied in high volume transaction environments”.  

Kubiak says it is unlikely that a global regulatory framework which includes definitions of sustainable trade will emerge. “The ICC principles should fill that role.” 

“However, we do need regulators to buy in to the framework – in part, to avoid counterproductive regulatory interventions”, but also “to advance any possible future discussion on preferential macro prudential treatment for sustainable trade assets”.