International Chamber of Commerce (ICC)
Foreword from Secretary-General of the International Chamber of Commerce
With global trade representing up to 30% of global greenhouse emissions1, we recognize
its critical role in addressing the climate crisis. Trade must transform itself into an engine for the implementation of the Paris Agreement and sustainable development. Since the launch of our positioning paper in 2021, ICC has continued to advance its work on developing a common definition of sustainable trade and sustainable trade finance and establish a set of principles that provide a frame to measure and assess sustainability in this respect. Over the past three years, we have refined the principles in response to feedback from world leading corporates, trade banks, and industry bodies, ensuring our approach meets the evolving demands of sustainability.
As the urgency to limit global warming to 1.5°C intensifies, sustainable trade is more critical than ever. ICC remains committed to guiding the global business community toward a sustainable and inclusive future. Our updated Principles for Sustainable Trade (PST) – in their third wave – are designed to enable the industry to accurately assess and incentivise sustainable trade, building more resilient supply chains, and ensuring that trade plays a key role in meeting the Paris Agreement goals.
As a result, ICC has taken a pivotal step by introducing the Principles for Sustainable
Trade Finance (PSTF). The PSTF address critical challenges in assessing sustainability within trade finance including Green Trade Finance, guidance on sustainability-linked trade and supply chain finance, and setting out ICC’s ambition for Social Trade Finance. These principles represent an industry-wide effort to direct financing toward sustainable trade finance activities, whilst managing the risks of greenwashing and fostering transparency across financial institutions, corporates, and governments.
The PSTF will also serve as a key component of the wider Principles for Sustainable Trade (PST), which is an integrated and holistic approach to sustainability. ICC is proud to have taken substantial input in the drafting of the PSTF from leading global trade banks, including HSBC, Standard Chartered, Santander, Deutsche Bank, and Commerzbank.
By positioning PSTF within the broader PST, ICC aims to incentivise comprehensive assessments of trade transactions, ensuring that environmental and socioeconomic impacts are considered together. This approach encourages businesses to view sustainability through a multifaceted lens, capturing the full value of their trade activities.
Whilst significant progress has been made, this is just the beginning of the journey toward truly sustainable trade. The introduction of the PSTF and the enhancements to the PST further strengthen ICC’s leading role to guide the global business community in meeting both environmental and socioeconomic goals, in line with the United Nations Sustainable Development Goals.
I invite all stakeholders—whether in finance, industry, or policymaking—to continue collaborating with us as we strive to make global trade a force for good. The work we do together today will shape the future of sustainable trade for generations to come.
1World Trade Organisation – Trade and Climate Change
Executive Summary
Global trade plays an essential role in fostering sustainable economic development by providing countries with access to goods, services, and enhanced living standards. Trade is also increasingly pivotal in driving sustainability and climate action. However, significant untapped potential remains for trade and trade finance to further contribute to achieving the Paris Agreement targets, decarbonising the global economy, and advancing the United Nations Sustainable Development Goals (SDGs).
To address the need for a clear and comprehensive definition of sustainable trade, ICC launched a programme in September 2021 to establish global standards. This programme brought together a range of stakeholders, including trade banks, corporates, technology partners, and sustainability experts. At COP27 in 2022, ICC introduced the initial principles—Wave 1—which focused on the textiles and apparel industry.
Building on this foundation, ICC introduced Wave 2 in 2023, expanding its scope from one to four sectors and assessing trade through both environmental and socioeconomic dimensions. In Wave 3, ICC has worked with leading banks and pilot participants to gather invaluable feedback, evolving the framework into an implementable programme that caters to the needs of all sectors. In Wave 3, the Principles for Sustainable Trade Finance (PSTF) have been introduced as a component of the broader Principles for Sustainable Trade (PST). ICC’s PSTF provide detailed guidance on how trade finance transactions can be assessed for sustainability based on their use of proceeds, specifically addressing the complexities of finance products where the end-use is often unknown.
The key objectives of the Principles for Sustainable Trade (PST) are to:
• Establish a clear and actionable definition of sustainable trade and trade finance
• Develop a methodology to assess the sustainability of trade transactions and portfolios
• Ensure recommendations are practical and scalable for global adoption, allowing comprehensive assessments of sustainability across entire value chains
Key improvements in Wave 3 include:
• Expanding the principles to include all sectors, providing nuanced assessments based on sector-specific evidence
• Simplifying assessments into two levels: Principles and guidance on methodology.
– The principles are pillars that enable robust sustainability assessments, yet remain flexible enough to allow users to build the principles into their existing policies and processes
– ICC provides Guidance on Methodology to enable users to effectively operationalise the principles into a methodology, and clearly communicate assessment outcomes
• Developing the Principles for Sustainable Trade Finance (PSTF) as the Use of Proceeds component in the PST which set thresholds and assessments comparable to other green and social finance frameworks
• Subsequently enhancing simplifying Use of Proceeds assessments to ensure alignment with established frameworks like the Loan Market Association’s (LMA) Green Loan Principles (GLPs)1 and ICMA Green Bond Principles (GBPs)2, enabling more flexibility in adoption
• Strengthening the Distribution Assessment to cover grid networks, pipelines, and different transportation methods
• Updating the Sustainable Credential Library to consolidate recognised standards, conventions, and ESG scorers
Through these updates, the PST remain committed to its founding principles: maintaining high standards for sustainability, ensuring practical application, and using robust resources that are readily available to stakeholders. Wave 3 brings a pragmatic and scalable approach to sustainability assessment, aligning with global goals whilst accommodating specific businesses’ needs.
The journey toward fully sustainable trade continues, with Wave 3 positioning ICC to lead this transformation through actionable, robust, and globally relevant standards.
1https://www.lma.eu.com/sustainable-lending/resources
2https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-principles-gbp/
Introduction and Objectives
Context and background
Global trade is a vital engine of sustainable economic development, allowing countries to better integrate into the global economy, gain access to differentiated goods and services, and achieve higher standards of living. It also plays an ever-increasing role in advancing sustainability and climate action, representing as much as 30% of all carbon emissions2. However, there still remains significant potential for trade and linked finance to play an even greater role in achieving the Paris Agreement target, accelerating the decarbonisation of the global economy, and becoming a key driver to help reach the UN Sustainable Development Goals (SDGs).
Although several standards exist for sustainable goods, services, and financial products, there has yet to be a clear and comprehensive set of principles that robustly defines sustainable trade.
To address this gap, ICC launched a programme in September 2021 to develop global standards for sustainable trade, ensuring a practical and thorough approach to assessing the sustainability of trade transactions. The programme brought together stakeholders, including trade banks, corporates, technology players, sustainability experts, and BCG, to deliver the intended outcomes.
At COP27 in 2022, ICC introduced a minimum viable version of the principles (Wave 1) focused on the textiles and apparel industry. Then, in 2023, Wave 2 broadened the principles to cover three additional sectors (Agriculture, Energy and Automotive), assessing trade across both environmental and socioeconomic dimensions across an enhanced methodology leveraging feedback received during the Wave 1 pilot.
In October of this year, ICC launched the bespoke Principles for Sustainable Trade Finance (PSTF) at Sibos in response to a call from the industry to provide specific guidance on Use of Proceeds and Sustainability linked assessments for Trade and Supply Chain Finance. The PSTF were built with a key objective of interoperability with the wider PST as seen in this document, and sits as the Use of Proceeds component within the PST.
Wave 3 of the PST, launching at COP29, builds upon this foundation, incorporating valuable feedback from banks, corporates, and industry experts, evolving the project into an implementable and scalable program.
Purpose and Objectives
ICC’s purpose
Through its Principles for Sustainable Trade programme, ICC seeks to accelerate global trade’s role in helping companies (i) support achieving the Paris Agreement objectives to
limit the increase in global temperature to 1.5°C above pre-industrial levels, (ii) reach the UN SDGs including goals not related to climate and green objectives, and (iii) achieve greater understanding of sustainability in global supply chains.
ICC’s principles hope to capture the multi-dimensionality of trade transactions by considering not only the goods or economic activity being financed, but also the Buyer and Seller of the goods and the distribution method of the trade transaction according to both environmental and socioeconomic sustainability. The principles also aim to capture the complexity of trade transactions by assessing multiple dimensions of sustainability through multiple sources of evidence and a granular grading process. As the principles evolve, these considerations will continue to be central to its design.
Programme Objectives
Given this purpose, ICC has four key objectives for the project as a whole:
- Agree a definition of sustainable trade and green trade finance
- Agree what constitutes a sustainable trade transaction by setting the standards for sustainable trade and sustainable trade finance
- Propose a methodology to measure and assess the sustainability of a given trade transaction or trade finance portfolio
- Ensure that recommendations are actionable and practical, encouraging global adoption, which will allow a more comprehensive view of sustainability across the value chain in all sectors
Priorities for the Wave 3
ICC piloted the Wave 2 framework between the end of 2023 and the beginning of 2024 with over 30 leading trade banks, representatives from trade and supply chain finance technology, and a small number of corporates. ICC shaped Wave 3s design objectives using feedback from the pilot. These design objectives of Wave 3 are:
• Expand the scope of the principles to include all sectors, using evidence to provide sector- specific context and nuances.
• Distil the document into high-level, less prescriptive and simplified Principles that banks can align their own policies and processes to.
• Include an optional, but more implementable and practical Guidance on Methodology section.
• Enhance assessments of Use of Proceeds and develop a bespoke Principles for Sustainable Trade Finance, and ensure greater accessibility and alignment with existing frameworks, such as the LMA and ICMA Green Loan Principles (GLPs) and Green Bond Principles (GBPs). This includes incorporating a wider range of methods to evidence sustainability and enabling the screening of transactions based on either their purpose or the goods involved.
• Expand the scope of distribution assessments to cover grid networks, pipelines, and various means of rail and road transport.
• Update and consolidate the lists of ICC-recognised standards, conventions, and ESG scorers into a comprehensive Sustainable Credential Library.
• Shift toward ESG Impact (or dual materiality) assessments in the evaluation of Buyers, Sellers, and distributors, whilst improving the principle’s automation capabilities.
In wave 3, ICC remains committed to the design principles laid out in previous waves:
• Anything described as sustainable in the principles must be sustainable. The rigour of ICC’s definition of sustainability must not be compromised on, and whilst Do No Significant Harm (DNSH) is important, it is insufficient by itself.
• The principles must be simple and workable so that it can be applied by banks and corporates at a reasonable cost.
• The principles must make use of sustainability resources readily available to banks and corporates. It should not be purely theoretical and cannot be designed to use technology
or data that does not yet exist; however we will look at automation of the framework that may require bespoke tooling.
Details about how ICC has addressed feedback from the pilot are in Appendix A.
Aim for the target state
The Wave 3 principles represent a significant evolution over previous iterations, but it remains just one step on the longer path toward the target state. The current approach, which prioritises the adoption of clear and scalable principles, is designed to ensure that sustainable trade and trade finance can be applied consistently across sectors. As sustainability standards, data, and industry practices continue to evolve, ICC will evolve the principles to reflect these advancements and increase the accessibility of the principles to cater better for both SMEs that may struggle to evidence sustainability without a centralised registry of compliant businesses, and emerging markets where sustainability credentials may be insufficiently mature.
A key focus of Wave 3 is to cater for the needs of Sustainable Trade Finance through a redevelopment of the Use of Proceeds assessments that fits within the wider PST. In
conjunction with this aim, ICC has targeted three key goals for this year: operationalising the principles through the ICC Sustainable Credential Library, expanding its scope to include all sectors, and simplifying its usability through sector-agnostic principles and enhanced automation capabilities. ICC’s objectives for the next iteration and its vision for the target state are further detailed in Section 13.
Overview of the Principles for Sustainable Trade (PST) – Wave 3
The Principles for Sustainable Trade (PST) serve as a set of comprehensive sustainability principles enabling the evaluation of trade across four key components: Use of Proceeds, Buyer, Seller, and Distribution. Assessments cover two critical dimensions for each component: environmental and socioeconomic sustainability. These assessment pillars are supported by three further pillars to enable and enforce rigour in assessments.
Definition of Sustainable Trade
Sustainable Trade refers to trade where the Use of Proceeds, the involvement of the Buyer and Seller, and the method of distribution are aligned with environmental and socioeconomic sustainability objectives, as defined in the UN Sustainable Development Goals (SDGs).
In the PST, there are four distinct components of trade that may be assessed across two distinct dimensions. ICC recommend visualising this in a 4×2 matrix.
Principles for Sustainable Trade Finance (PSTF)
In Wave 3, ICC has introduced the Principles for Sustainable Trade Finance (PSTF)— with principles tailored specifically for trade finance. The PSTF include:
- Principles for Green Trade Finance (PGTF), which focus on the environmental dimension and outline how use of proceeds should be assessed for alignment to environmentally sustainable activities.
- ICC Guidance on Sustainability linked Trade Finance
- ICC Guidance on Sustainability linked Supply Chain Finance
- ICC’s ambition for the Principles for Social Trade Finance
The PSTF are integrated into the PST as the Use of Proceeds assessments for both the environmental (green) and socioeconomic (social) dimensions. This overlap encourages users to conduct the more comprehensive PST, whilst aligning the PSTF with the broader principles. While the Principles for Social Trade Finance are still in development and currently outlined as an ambition above, the principles and methodologies presented in this document reflect ICC’s current thinking on the future principles. This provides stakeholders with insight into the direction ICC aims to take in shaping social trade finance standards.
For more information on the PSTF, please see here.