Canada is embracing green trade financing and investment options as it looks to recover from the global pandemic. The new funding streams will help to boost non-hydrocarbon revenues and help rebuild the economy in a sustainable way.
The new values are creating a new mode of business as the region navigates the largest transformation of our time. HSBC is at the forefront and is supporting businesses, entrepreneurs and communities that champion values and actions in the pursuit of sustainable prosperity as we build back better.
Green trade financing is emerging as an eco-friendly instrument, which is helping lay the groundwork for the development of sustainable products and services while driving corporate ESG agendas forward.
With green trade and financing sweeping across the world, Canadian governments at all levels and corporations are nimbly positioning themselves for the big switch. They are also aware that voters, investors, customers, business partners and other stakeholders are expecting on-the-ground changes.
HSBC has worked to support the working capital requirement of our clients that fulfill the Green Loan Principles and measurably contribute towards an ESG agenda.
The GLP model closely follows the Green Bond Principles that promotes integrity in the Green Bond market and has the backing of major financial institutions such as HSBC.
The GLP has four key tenets that companies must adhere to ensure that loan is used for sustainable purposes1. The four pillars are:
- Use of proceeds
- Process for project evaluation and its selection
- Management of proceeds
- Visibility over information on the project
HSBC’s own green propositions are built around the GLP and other market standard principals to ensure that the business classified as green meets these market benchmarks as a minimum requirement.
Where market benchmarks are unavailable, HSBC has constructed bespoke principals built on GLP for consistency and the broader UN Sustainability Development Goals, a globally agreed framework to help protect the planet, end poverty, and ensure peace and prosperity.
Milestone Green Trade Transaction
A sign of what’s to come for Canada can be seen halfway around the world.
This year, HSBC successfully concluded the first sustainable trade finance facility in the Middle East, North Africa and Turkey (MENAT) with Dubai-based Lamprell Plc, a major engineering and contracting services entity with a 40-year experience of building renewable, and oil and gas energy projects across the world.
HSBC was the sole arranger for the risk mitigating trade finance facility, including the first green guarantee facility in the MENA region, and the first sustainable documentary credit facility executed by HSBC globally. HSBC provided Lamprell Energy USD$ 48 million facilities use to finance the Seagreen Offshore Wind Farm project off the coast of Scotland. Click here to explore the case study.
Green trade financing is emerging as a truly global phenomenon with some of the world’s largest corporations finding innovative ways to develop sustainable sources of supply.
In 2019, HSBC joined forces with Walmart Inc2. and The Sustainability Consortium (TSC) to co-create a Sustainable Supply Chain Finance Programme (SCF) that pegs a supplier’s financing rate to their sustainability standards. This global programme allows improved financing for suppliers across 21 countries who demonstrate progress in reduction of greenhouse gas emission - contributing to Walmart’s Project Gigaton, which aims to achieve a total reduction of one billion metric tons (one gigaton) of greenhouse gas emissions by 2030.
The Sustainable SCF is emerging as a powerful mechanism that rewards sustainable products and services from inception to completion. The branch-and-root approach of SCF will create more transparency, and make the fragmented supply chains more traceable and transparent through GLP principles.
Green Financing for a More Resilient Economy
A recovery based on green trade financing would help Canada revive a diversification push that stalled during the health crisis. It would also help them reach their long-term Sustainable Development Goals (SDG).
In Budget 2018 the Government of Canada committed nearly $110 million in new funding to support SDG efforts over a 13-year span, including $49.4 million to establish a Sustainable Development Goals Unit within Employment and Social Development Canada (ESDC). This investment was supported by a further $59.8 million ($4.6 million annually) for a Sustainable Development Goals Funding Program to support the government’s commitment to deliver on a whole-of-society approach to the implementation of SDGs in Canada.
But government funding alone will not help Canada reach its SDG targets.
According to the Public Policy Forum, rising debt and stagnating growth as a result of the COVID-19 pandemic is constraining SDDG investment and, as a consequence, intergenerational equity. “A sustainable recovery is the only option as COVID-19 has shown us the risks of not building a resilient economy. To do so, domestic resources and private sector investment must be articulated, diversified, and mobilized in the direction of the SDGs — not only within Canada, but also in its international aid policy,” according to a recent PPF3 report.
Green trade financing solutions support customers, regional governments and corporations, looking to source sustainable raw materials, develop eco-friendly products and trade in commodities that are produced from low-carbon or renewable energies.
The global financing world is turning on its head. Market disruptions are evident everywhere and many conventional methods of raising funds are being replaced by innovation, or sustainable twists that will lead to a world where sustainability is part of the bottom line.