TRADE FINANCE AND CLIMATE ACTION
WHAT’S IN A
Financial institutions are promoting green economies and sustainable trade through green trade finance mechanisms By Başak Pamir, OPEC Fund CONTAINER?
F inance, transportation and commodity trading collectively play an essential role in helping countries reduce emissions and tackle climate change. By increasing the availability and affordability of climate-friendly goods, services and technologies through trade finance, banks and multilaterals are collectively driving sustainability in global trade and supply chains. The World Trade Organization’s (WTO) World Trade Report 2022 argues that trade is a force for good for climate and part of the solution for achieving a low-carbon, resilient and just energy transition. “While trade itself does generate emissions from production and transport, trade and trade policies can accelerate the dissemination of cutting-edge technologies and best practices, and enhance incentives for further innovation,” says WTO Director- General Ngozi Okonjo-Iweala. “Trade is instrumental for investments in clean
energy to have the greatest reach and impacts, at lowest cost and where they are needed the most.” This is where green trade finance comes in. Yunus Energy, a Pakistan- based renewable energy company, was able to obtain blades, generators and turbines for the development of the country’s first wind farm in the village of Jhampir, 100km from the capital Karachi, from Germany with the support of a green trade finance line from the International Finance Corporation (IFC) and Deutsche Bank. IFC issued a guarantee to Deutsche Bank to back a letter of credit issued by the local Bank Al Habib, which allowed Yunus Energy to import the equipment. “Through our Climate-Smart Trade Finance initiative we use our existing trade finance facilities to support the financing of imports, exports and the local distribution of imported green technologies and materials,” says Nathalie Louat, IFC Director, Trade
Trade is instrumental for investments in clean energy to have the greatest reach and impacts.
Ngozi Okonjo-Iweala, WTO, Director-General
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