By Simon Jessop

LONDON (Reuters), – The standard setter of global trade finance flows, an executive said to Reuters that he has proposed a set new rules for defining sustainability in trade finance. It is estimated that the setter will cost around $5 trillion annually.

There aren’t any standards for trade financing. While government and business leaders move swiftly to create guidelines for sustainable finance types, they don’t have the time or resources to do so. These rules would be applicable to about a third global trade.

Andrew Wilson (ICC policy director), said that a shared rulebook can help to direct trade towards efforts to reduce greenhouse gas emissions while also meeting the United Nations development goals.

While others have begun to set definitions for parts of the sustainable finance industry, such as green bonds, “none of those frameworks can be easily or reliably applied to the financing of trade,” Wilson said on the sidelines of the COP26 climate talks https://www.reuters.com/business/cop in Glasgow.

The complexity of a trade finance framework is increased when more stakeholders are involved. Additionally, supply chain monitoring must also be taken into consideration.

Companies and banks are trying to assess the viability of trade agreements in different ways. This can sometimes be difficult.

Wednesday’s position paper was released by the ICC. It is expected that this document will become guidelines for 2022. Based on more than 200 inputs from banks and companies, including HSBC (MC:), Santander (MC-:) and Commerzbank(DE:), the paper was created with Boston Consulting Group.

Further input, such as from governments and civil society, would be required before finalisation of the framework to guarantee consistency among banks on how they categorise transactions.

Wilson stated that if the framework was deemed to be workable, then the ICC will look at developing sectoral standards for certain types of transactions.

Wilson stated that while the ICC rules do not have to be followed, they are a recognized standard-setter and are frequently cited in court cases.

He stated that he expects the framework to remain under discussion until the second half of 2022 when more details will be available. The final rules will then be released in the third quarter.