co-authored by Gerardo Salonia

What may it imply for banks?

1.Likely implications for banks

The title already suggests its main conclusion: there are effectively no implications as of today, however there will certainly be. It may not be clear what banks will need to do to comply with such a sustainability assessment framework, and alike adoption of any other framework and regulation, it will heavily depend on each bank’s situation and capabilities; both from a human and a technological perspective. Be it as it may, in terms of sustainability regulations, we expect it is a matter of time until there are major implications. As a result, we deem very important to start thinking about potential changes in the client relationship model, data management, risk systems and operational processes.

First challenge – Data systems interoperability

Trade finance systems are usually connected to many other different applications in the bank: core banking system, payments, accounting, treasury, risk, etc. Especially for banks lacking a completely integrated trade finance platform, which are the vast majority, data belonging to specific transactions is therefore scattered throughout the bank’s system landscape. So, bank’s main challenge in this dimension will not only be having to capture and store much more transactional data, but data itself will also be more complex to collect so to either report it or use it for the assessment.

One of the starting points that banks could have is to examine their current data management systems and work out a solution that would facilitate managing trade finance transactional data in a centralized way. A feasible approach is to build a scalable solution that would also serve business intelligence purposes, thus enhancing the advisory offering, cross-selling, and, in the long-run, revenues and customer loyalty.

Second challenge – Enhanced KYC process with additional sustainability data

It is possible that in the near future, financial institutions will include sustainability questions in the new client onboarding and KYC processes, for instance if the prospect has achieved carbon neutral operations. Moreover, it would be very helpful for the bank to achieve a complete overview of the client that includes a sustainability assessment. This would then be complemented with transactional data after initiating the relationship.

This new KYC data can be used to create accurate risk scoring for the prospect, to provide different kind of products, or considered as relevant information for any kind of transaction monitoring on a particular client. A challenge may raise if financial institutions must know even more details about the client’s clients than they currently do and understand if their sustainability degree is good enough to engage in the transaction.

Third challenge – Achieving sustainable trade finance transactions

Banks will not be able to do sustainable trade finance unless there is an underlying sustainable trade transaction. In order to meet their sustainability goals, banks will likely have to think about how to incentivize or encourage their clients to perform their trade transactions in compliance with the sustainability standards yet to be defined, e.g. via pricing or enhanced service offering, among other potential levers. In order to guarantee a sustainable trade transaction, banks will likely have to assess the sustainability degree of trade components, such as: goods and services exchanged, seller/origin, buyer/destination, transportation (not of the whole supply chain, but just the step that was financed) and the purpose. Regarding the latter, it considers the immediate or end use of the goods and services. By assessing a transaction so thoroughly, banks among other parties have a solid decision basis to evaluate whether to engage or not in an operation.

To assess the whole information and make decisions, banks could rely on robotic process automation and machine learning. It does not seem feasible to manually manage the transactional data that will likely be required to complete the trade finance sustainability assessment. Therefore, it could be very helpful to incorporate these technologies, thus prompting any operative task in an automated way, be it generating the sustainability assessment outputs (reporting infographic or descriptor/ score), be it adjusting pricing conditions, or reporting.

2. Outlook – heading to the future of Sustainability

Whatever the implications will be, it is worth mentioning that this is not expected to represent a ‘tsunami’ in terms of a huge impact that will fundamentally change banking business, processes, or systems. Of course, it will be challenging, yet banks have been able to cope with similar situations in the past. Especially those that were well advised were able to properly anticipate to upcoming changes by creating budgets and building teams early enough, thus approaching matters in a proactive way. Why is staying ahead of the curve so important, though? When implementing sustainable trade finance, we believe that it will be key how banks reshape their offering, not only to comply with the standards; be it regulation-, be it market-driven. Instead of just aiming to show a “green image” to the public eye, banks will have the chance to enhance their advisory by providing a true value-adding service to their business and corporate customers.

Gerardo Salonia

Gerardo Salonia

Senior Principal

Gerardo Salonia is a Senior principal within our financial services practice in Germany with a focus on compliance, AML and KYC areas. He has extensive consulting experience within the financial services domain. Gerardo has enabled several European companies and financial institutions to overcome the challenges posed by disruptive technologies and transform into digital-oriented organizations. Gerardo holds an MBA in business administration from the University of Mannheim and has a risk management certification from the Goethe Business School – Frankfurt University. He is a certified anti-money laundering specialist (CAMS).

Jorge Martinez de Paz

Jorge Martinez de Paz


Jorge Martinez is Principal Consultant and has pivoted his professional career around strategy and technological implementation projects in retail, business, and corporate banking. After 10 years of experience delivering projects for many different banks around the world, he has been involved in revenue enhancement, cost optimization and efficiency improvement projects. His main technical know-how rests on trade finance product management, data analytics, IT implementation and change management. Jorge holds a master’s degree in economics from Berlin’s Freie University and a Diploma from Madrid’s Autónoma University. He is certified SAFe 5 Agiligist, Professional Scrum Master and Product Owner.

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