Banks are going to great lengths to digitise trade processes while acknowledging the various obstacles to completely removing manual or paper-based transactions.

Six years after the Paris Agreement and the world is still looking for enablers to accelerate the net-zero journey. Many see trade finance instruments as the next significant step but that requires accurate and structured data, robust reporting capabilities, and streamlined processes. Key leading players in the area tell Euromoney what is changing in the world of sustainable trade finance.

Corporate supply chains are facing logistic, shipping and operational challenges while also under pressure from geopolitical tensions and natural disasters, as highlighted by trade leaders at the world’s leading banks in Euromoney’s Trade Finance Survey 2024.

As multinationals navigate the complexities of developing Asian businesses – amid supply-chain reconfigurations, the rise of sustainable financing and the penetration of e-commerce – treasurers are playing a bigger role in strategic decision-making.

The decision by the US SEC to drop mandatory Scope 3 reporting weakens global emissions reporting standards. However, many corporate issuers are already using Scope 3 performance targets on sustainability-linked transactions for non-regulatory reasons. Are the debt and equities markets leading companies onto ESG ground upon which regulators fear to tread?

The German lender’s decision to put its chips on southeast Asia is paying off handsomely. Under the leadership of Asia CEO Alexander von zur Mühlen, Deutsche Bank has doubled its capital in Vietnam and Indonesia, with more to come, moved a host of global roles to the region, and has seen Asean eclipse its India and China business in terms of growth and absolute numbers.

There was a big rise in the number of respondents to Euromoney’s Trade Finance Survey 2024 who received an increase in credit from their trade banks last year – 45.7%, up from 41.8% in 2023.

More than 60% of respondents to Euromoney’s 2024 trade finance survey expect an increase in use of trade financing over the next three years.

Data hoarding, ESG illiteracy and credit risk are roadblocks for regional banks looking to establish sustainable supply-chain financing programmes in the Gulf, just as COP28 approaches.

While banks have accelerated digital solutions across business lines, accomplishing end-to-end digitalization of global trade remains far beyond their reach. The complexity of supply-chain finance remains a challenge, and banks continue to hunt for scalable solutions. Embedded finance could be the answer.

The inability of trade-finance participants to fully leverage the value of the data generated by transactions remains a source of frustration, particularly for small businesses.

Widespread use of ISO 20022 could have a far-reaching impact on supply-chain finance by facilitating faster processing of transactions.

While foreign investment in China has fallen, supply-chain shift is a different story. Rather than transferring their main production away from China, manufacturers are cultivating deep regional supply chains across Asia and beyond.

Beneath the Great Game geopolitics of US-Vietnam relations, there are some intriguing possibilities in the detail.

For decades, transaction banking was a profitable but largely ignored corner of the banking industry. Then Covid happened. Today, bank chiefs see it as critical to everything they do. Given the challenges ahead – collaborating with fintechs and embedding ESG principles in global supply chains – the revolution under way in this business is unstoppable.

Providers of trade finance remain bullish despite predictions that growth in global trade will stagnate during the remainder of this year.

The green transition is boosting demand for key metals and Africa’s commodity markets are under pressure to increase extraction. But buyer awareness of Scope 3 emissions means that processes need to be cleaned up and fast.

Most leading providers of trade finance have welcomed changes to disclosure rules despite research suggesting they could negatively impact demand.

As interest rate volatility persists, corporates are taking a hard look at their trade finance options.

Twinco Capital facilitates access to sustainable funding by focusing on pre-production finance.

Business-to-business buy-now-pay-later providers are optimistic that economic uncertainty and higher interest rates will drive corporates to pay suppliers sooner and secure inventory more rapidly.

The impact of the supply chain disruption that was such a notable feature of last year’s trade finance survey continues to be felt as banks widen the range of services designed to improve corporate resilience.

Big transaction banks are responding to corporate customer demand for sustainability linked supplier-finance programmes by extending the geographical availability and range of the products they offer.

Strategies and financing need to be radically reassessed to achieve sustainability in a rapidly changing world.

More awareness by corporates of the role played by small suppliers has boosted early payment programmes.

Several FIs hope to capitalize on an easing in physical supply-chain constraints to extend trade-finance offerings.

In a momentous year for the industry, the top tier of trade finance banks remained remarkably stable in this year’s Trade Finance Survey. Supply chain disruption will continue to bedevil the sector and liquidity provision together with digital innovation will place sizeable demands on trade finance banks in 2022.

Corporates want to improve sustainability in their supply chains, but, if anything, the barriers to doing so are getting worse.

Global supply-chain bottlenecks have profound implications for how and where companies will fund their operations in the future. As the lines of ships lengthen outside ports, there’s a macroeconomic cost for banks weighing on loan demand and perhaps asset quality. However, some trade and logistics financing businesses that were previously on the margins of banking are now seizing their moment.

Banks are taking a more proactive approach to sustainable trade finance, recognizing that their responsibilities extend beyond simply providing financially competitive products.