One of the core pillars of the Paris Agreement is to make financial flows consistent with the goals and undertakings of the agreement. While emphasis has been placed on financial flows provided and supported by MDBs, the primary focus has been on long-term finance or project finance. A significant share of financial flows required to support the agreement goals, however, is represented by short- and medium-term cross-border financing of equipment, goods and commodities needed for the deployment of clean energy technologies, energy efficiency upgrades, and climate smart agriculture, among other areas. Trade finance, therefore, has an important role to play in aligning itself with the Paris Agreement. It can also be a central part of the solution – supporting both mitigation and adaptation.
IFC introduced the concept of Sustainable Trade in 2010 as an incentive for participating banks in its Global Trade Finance Program (GTFP) to facilitate cross-border trade of sustainable equipment and raw materials that support climate change mitigation and resilience activities (e.g., renewable energy, energy efficiency, climate-smart agriculture, green transport, green buildings, etc.). Since the inception, IFC has not only supported more than $7 billion in climate trade deals and has also expanded its climate-smart initiative to other of its trade programs – Global Trade Liquidity Program (GTLP), Global Warehouse Finance Program (GWFP) and Global Supply Chain Finance Program (GSCF).
Recently we have partnered with the Asian Development Bank (ADB) to align our definitions and eligibility criteria of sustainable trade as we believe that standardizing our approaches will benefit our clients and other stakeholders as we grow this important aspect of our trade program.
For examples of categories of sustainable trade-related goods, equipment and commodities that could qualify for financing from IFC and/or ADB, please download the Reference Note for Sustainable Trade Finance.
