Published: December 10, 2024
So far, global transaction banking lacks any industry standards around sustainability, meaning it falls to individual banks to design their own frameworks.
In May, Societe Generale launched a new framework for sustainable global transaction banking (GTB), arguing that their clients need some additional support. With ESG issues fast climbing the corporate agenda, many companies are looking to quantify the environmental impact of their transactions. To date, though, the market lacks any standardised tools for helping them do so.
Since 2018, the global syndicated loans market has benefitted from the Green Loans Principles, which provide market standards and guidelines that can be applied on a deal-by-deal basis. The idea was to support the role that green credit products can play in the energy transition. The framework has been a resounding success: since it was introduced, the global sustainable loan market size has surged in the past six years from US$99bn to US$860bn in 2023.
The global transaction banking market, by contrast, does not have clear guidelines around sustainability. And while the market is growing at between 15% and 20% a year with consultancy firm McKinsey estimating that revenues from sustainable GTB will hit US$35bn by 2025, this ‘bread and butter’ area of banking lags considerably behind the green loan market.
The slow uptake, as McKinsey sees it, can be attributed to paper-intensive processes, limited data on companies’ sustainability-related activities, and a lack of industry standards for evaluating their clients’ activities. Research suggests that there is a huge amount of demand for sustainable GTB products, and that only 10% of this demand is being met. Solving these kinds of problems would go some way towards closing the gap.
One bank’s efforts