By Mark Norris, Partner and Theodora Okocha, Trainee

Environmental, Social and Governance (ESG) is currently at the forefront of discussions around trade and export finance, yet its application in this field is still unclear. At a time where a lot of money is moving from traditional financing into sustainable financing, market participants want to know how ESG can be implemented (and documented) into their transactions in a meaningful way.

In this blog post, we consider some of the key ways in which ESG has impacted trade and export finance, including Green and Social Loans, Sustainability Linked Loans and the push to create market standard drafting to address ESG principles.

Growth in ESG Lending

There has been significant growth in ESG lending in recent years, with Bloomberg LP reporting the increased issuance of ESG bonds and loans from $26.6 billion in 2013 to $732.1 billion in 2020. Notably, the growth of Sustainability Linked Loans has surpassed the growth of Green Loans (both described below) in recent years.

The UK government is providing significant support for sustainable projects, with the UK’s export credit agency (UKEF) contributing £2.4 billion to sustainable projects in 2020 and a further £2 billion earmarked by the UK government to support the UKEF clean growth direct lending facility for “clean growth” and “green” projects.