Swift has integrated the International Chamber of Commerce’s (ICC) sustainable trade finance guidelines into its KYC registry, effectively creating an independent environmental, social and governance (ESG) reporting repository for companies around the world.

The tie-up, which GTR first reported last year, means that corporates with multiple banking partners will no longer have to provide ESG information in differing formats through bilateral exchanges, which is costly, time-consuming and inefficient. Instead, the inclusion of the ICC’s guidelines on the KYC registry provides an industry standard that means corporates will only need to complete and update a single form that they can then share with their banking partners.

“Never before have environmental and sustainability practices had a more significant bearing on the financial decisions made by consumers, investors, corporates and financial institutions alike,” says Bart Claeys, head of data and analytics products strategy at Swift. “This has led to a huge increase in demand for ESG due diligence which has, due to a lack of standardisation, been difficult to provide.”

Launched at the ICC Banking Commission’s 2019 annual meeting in Beijing, the ICC’s sustainable trade finance guidelines take the form of an easy-to-use questionnaire, covering sustainability commitments, capacity and track record, supply chain practices and what commodities a company trades.

By integrating this into the KYC registry, an online portal that was set up in December 2014 to enable the Swift community to manage and share compliance information, the ICC’s sustainable trade finance working group aims to expand the use of the guidelines to make it easier for financial institutions to assess the ESG credentials of their clients when making financing decisions.

“This is the first industry standard for ESG matters that has been put out there so that people can refer to something,” Roberto Leva, relationship manager at the Asian Development Bank’s trade and supply chain programme and the working group’s co-head, tells GTR. “In effect, it takes the questionnaire mainstream by tapping into Swift’s industry utility, which is already recognised and regularly leveraged worldwide.”

Importantly, the registry doesn’t provide financial institutions with a judgement on whether or not a company’s activities are sustainable – there remains no standardised definition of what does or does not constitute sustainable trade, with the line between what is brown and what is green changing depending on which financial institution is looking at a deal. Just to take one example, for some, coal power financing is a red line, while for others, coal is the only way to ensure electrification in developing nations.

However, the inclusion of the ICC guidelines into the registry means that, for the first time, sustainability due diligence is being given the same footing as compliance with anti-money laundering and financial crime directives.

“The integration of the ICC sustainable trade finance guidelines into Swift’s KYC registry is a great show of progress towards embedding sustainability in trade finance transactions,” says Andrew Wilson, permanent observer to the United Nations at the ICC. “We are delighted to have been able to partner with Swift to mainstream ESG considerations into customer due diligence processes. Enabling alignment of financing with global sustainability objectives is a top-order priority for ICC – not least in light of lessons learned from the Covid-19 crisis.”

For now, the ICC questionnaire is available as part of the KYC registry baseline to the over 600 corporate entities that are currently signed up to it. The two sides are now working on the equivalent for correspondent banks, which would essentially be analogous to the Wolfsberg correspondent banking due diligence questionnaire (CBDDQ), enabling banks to share their ESG practices with their network.