The sustainable shipment letter of credit (SSL/C), a financing solution that banks can use to promote international trade in sustainably produced commodities, is proving popular amongst banks according to a recent survey.

The IFC provides preferential terms for SSL/C shipments to its partner banks, offering potential reductions in the cost of capital.

Popular choice

Out of more than 100 people canvassed by Westpac on the sidelines of Asia Trade &

Treasury Week in Singapore recently, 37 per cent of respondents said they were using SSL/Cs in sustainably sourced commodity transactions.

A substantial 48 per cent of respondents to the survey said they are working towards stopping deforestation.

Sustainable roles

In 2012, many financial institutions signed up to the Soft Commodities Compact, through which banks are helping their clients achieve zero net deforestation by 2020. The SSL/C was introduced in 2012 to support the compact.

But banks are not the lead agents in promoting sustainable trade according to the survey. Only 12 per cent of respondents thought that financial institutions "have the most responsibility in driving sustainable trade."

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.