Boosting ESG in the Supply Chain: The Role of Green and Sustainable Trade Instruments

Arguably, the focus on corporate supply chains has never been more intense. Not only are companies looking for new ways to make their supply chains more resilient in the face of macroeconomic headwinds, they are also seeking to make them greener and cleaner. As ESG becomes a major factor in this space, it is important to be aware of the growing range of tools available to treasurers to help support sustainability.

Sustainability has become a key strategic topic for most corporates across the globe, with a recent ING study showing around 70% of companies accelerating their ESG activities. And as increasing numbers of businesses embark on the road to net zero, banks are also evolving to assist companies in navigating this changing environment by offering different sustainable finance solutions across all elements of the capital structure.

These solutions cover many different areas of the treasurer’s responsibility, ranging from green guarantees to sustainability improvement guarantees (SIGs), sustainable supply chain finance (SCF), sustainable receivables finance, and sustainable trade receivables purchase programmes. Let’s examine a few of the key instruments in more detail:

Green guarantees

These are intended to provide guarantee facilities to eligible green projects that are expected to yield clear environmental benefits and are in line with Green Loan Principles. To ensure accountability, independent review, verification, certification, or rating are required during and after the green projects’ completion. There are several explicitly recognised broad categories of green projects including renewable energy, energy efficiency, clean transportation, and sustainable water management,. For instance, ING signed a Green Guarantee facility agreement securing the obligations of our client under a virtual power purchase agreement (PPA) covering three wind farms that will fully generate green electricity to be sold on the Polish market for a 15-year period.

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