On 11th December, the International Chamber of Commerce (ICC) ratified two frameworks – the Principles for Social Trade Finance (PSoTF) and the Principles for Sustainability-Linked Supply Chain Finance (PSL-SCF). This action completes the ICC Principles for Sustainable Trade Finance (PSTF), establishing the first complete global standard for sustainability assessment across trade finance instruments.

Developed jointly with Boston Consulting Group (BCG), the framework emerges from consultations with over 100 stakeholders spanning banks, corporations, multilaterals, technology platforms and civil society organisations. The result provides a method that works across different regions and types of financial products.

The announcement follows endorsements of the initial Green Trade Finance component by eleven major financial institutions, including Standard Chartered, Santander, ING Bank, Commerzbank, BNP Paribas, and United Overseas Bank. It also follows the public consultation launched in July at the United Nation’s 4th Financing for Development Conference in Seville. 

Until now, trade finance has lacked consistent frameworks for assessing environmental and social impacts, creating market fragmentation and impeding capital flows toward genuinely sustainable activities. As a result, this validation comes at a time when supply chain resilience and ESG considerations are increasingly influencing financing decisions.

Architecture of the framework

The PSTF integrates three distinct assessment methodologies.

The first one is Green Trade Finance (PGTF). It establishes definitive Use-of-Proceeds criteria for environmental sustainability, aligned with established market standards, including the Loan Market Association’s Green Loan Principles. This component provides objective classification criteria for transactions funding environmentally beneficial activities, from renewable energy to sustainable agriculture.

The second is Social Trade Finance (PSoTF). PSoTF is the first dedicated framework for identifying and verifying social impacts in trade transactions. This standard focuses on financing for healthcare infrastructure, affordable housing, education facilities, and financial inclusion and also establishes new verification protocols for trade finance instruments.

Lastly comes the Sustainability-Linked Supply Chain Finance (PSL-SCF), which provides governance architecture for KPI selection, target calibration, and verification across sustainability-linked programs. This addresses previous challenges in establishing credible sustainability linkages where inconsistent metrics undermined market confidence.

What is the pathway ahead for implementation?

There are challenges to implementing these principles.

For instance, financial institutions need to build specialised due diligence capabilities, incorporate sustainability assessments into their transaction workflows, and create monitoring systems while working within their current operational limits. Data availability is another obstacle for transactions involving smaller enterprises or entities in emerging markets. 

To address this, ICC has indicated plans for supporting resources, including a Sustainable Credential Library consolidating recognised certifications and standards.

These principles aim to redirect capital flows towards more sustainable transactions. As adoption grows, financial institutions may include these standards in their pricing models, promoting sustainable practices across global supply chains. 

The framework is important because it positions sustainability as a key factor in trade finance valuation and risk assessment, potentially changing the way capital moves in global commerce. 

ICC encourages all stakeholders in the trade finance ecosystem to endorse and integrate these new principles into their operations.