Incorporating sustainability aspects in structured trade and commodity finance

Abstract

While in recent years the aspect of operation ecology is already widely introduced into the daily business of many banks, the issue of considering environmental aspects in external business relations as a part of sustainable business practice is a rather new and more difficult task. While the incorporation of environmental issues in credit management and investment funds becomes practice in some European and US banks, guidelines for the consideration of sustainability aspects in structured trade and commodity finance are rather more rare. This paper is an attempt to evaluate the existing opportunities to include environmental concerns into these two business sectors and to analyse which environmental criteria might be practicable. Above all the study is based on the consideration of financing trade with unsustainable or environmentally harmful substances. Concerning the sustainability aspects of these substances we revealed four criteria which will render substances as unsustainable. These are substances that are not degradable or only degradable over a long period of time, substances that are harmful to the environment and human health, and those that appear on regulatory or recommended negative lists. To give practical advice for banks, we identified products containing problematic substances and production processes causing problematic emissions. As a result we derived substance and product lists that may be used to help the organisational philosophy towards sustainability. The implementation of these lists would be a good starting point for financial institutions entering into a new area of sustainable business.

Citation

Weber, O. and Beeler, R. (1999), "Incorporating sustainability aspects in structured trade and commodity finance", Journal of Applied Accounting Research, Vol. 5 No. 1, pp. 97-111. https://doi.org/10.1108/96754269980000785