Financial institutions are under intensifying pressure to implement environmental, social and governance considerations into their portfolios and investment practices. This is particularly evident with newly established reporting measures pushed by regulation, seen with the establishment of International Sustainability Standards Board and the recommendations of the Task Force on Climate-related Financial Disclosures becoming mandatory. It is therefore imperative that ESG criteria are implemented by financial institutions across their supply chains.
This is especially complex when examining supply chains spanning across jurisdictions with different standards, laws and economic dynamics. To improve disclosure metrics and ensure ESG targets are met across value chains, corporations and financial institutions will need to set strong eligibility requirements, ensure transparency, establish clear objectives linked to financial incentives and advance technical skills to improve environmental governance. Greening supply chains will manage portfolio risk and vulnerabilities, but also meet the ever-expanding growth of ESG investment and products, including green loans and bonds.
This edition of the SPI journal invited contributors to share their insights on developments in greening the supply chain. Nneka Chike-Obi, director of ESG research at Fitch Ratings, speaks of modern slavery and the risk corporations face due to exposure to economies with poorly enforced laws.
The need for globally implemented standards in technology is explored by the Asian Development Bank, which has now implemented the Digital Standards Initiative to deal with this. Steven Beck, head of trade and supply chain finance, highlights the ‘opportunity for the private and public sectors’ to establish a system to ‘monitor trade and supply’.
The theme of digitalisation technology continues, with Benedicte Nolens, head of the Bank for International Settlements’ Innovation Hub, discussing their investigation into the use of new technology, specifically ‘tokenisation through the use of blockchain to reduce the potential denominations’ of the distribution of green bonds and use by investors in Hong Kong. It is evident from the pieces in this month’s journal that great strides are being made to green supply chains with technological and product development. This is essential if corporates and financial institutions are to hit emission targets and achieve net zero