• Climate-related risks are growing more severe as disasters grow more frequent.
• The Allianz Trade Sustainability Handbook outlines the company’s reasons for and strategies towards the goal of net zero by 2050.
• The problem is worst in emerging markets, meaning investors and underwriters have more trouble funding sustainable projects there.

Allianz Trade, the global trade credit insurance provider, released its first trade sustainability handbook yesterday, detailing its progress in reaching its environmental, social, and governance (ESG) objectives and the company’s approach to sustainability going forward. 

Trade is responsible for 23% of emissions globally, a number that grows every year. However, research by the World Bank suggests that the solution to climate change also lies in trade – while reducing imports would raise emissions globally, trade efficiently redistributes production to the least emissions-intensive country. 

As a result, global trade enablers like Allianz Trade are in a unique position to drive the transition to net zero. As risks related to climate change grow each year – from extreme weather events disrupting trade to global warming-related electricity outages – companies must be aware of the impact of climate change and become adaptable and resilient to it. 

An all-around ESG strategy

Companies which are wide awake to the impact of climate change have been making sustainability a top priority. “Climate change and new societal expectations are reshaping our role as insurer, employer, and corporate citizen,” said Florence Lecoutre, Board Member in charge of Sustainability at Allianz Trade. 

Allianz Trade’s Sustainability Handbook outlines the firms’ sustainability vision, its impact so far, and the road ahead. As part of Allianz Group’s goal of reaching net zero by 2050, Allianz Trade has committed to massively lowering its carbon footprint in the next few years – and has already come a long way, reaching 100% renewable electricity usage in 2023 and reducing greenhouse gas emissions per employee by 60%. 

Allianz Trade is also on the way to achieving a fully ESG-aligned portfolio, by supporting low-carbon and net zero projects and refusing new contracts with high-emission clients like oil and gas companies. This diverts funding from emission-intensive firms and towards projects which align with ESG criteria, accelerating the transition away from fossil fuels. “At Allianz Trade, sustainability is not just an ambition – It is a responsibility embedded in the way we operate,” said Aylin Somersan Coqui, CEO of Allianz Trade.

Transitions through partnerships

As part of its mission to support the green transition, Allianz Trade launched two new products – Specialty Credit and Surety Green2Green – aimed at supporting companies undertaking low-carbon or green energy tech projects. A prospective client’s project is assessed to see if it aligns with Allianz Trade’s sustainability goals; then, “If it meets our criteria, the premiums we earn from this transaction are […] held as investments in certified green bonds,” said Soenke Schottmayer, Head of Commercial – Global Surety. 

Allianz Trade is also collaborating with multilateral organisations to provide insurance to sustainable development programmes. A recent project to provide electric buses to the Baltic region, underwritten by the firm, reduced greenhouse gas emissions by 15% and cut carbon dioxide (CO2) emissions by over two tonnes. 

Meanwhile, a recent partnership between Allianz Trade and the International Finance Corporation (IFC) – the major global development institution providing finance to firms in developing countries – is enabling sustainable growth in emerging markets. 

A £150 million contribution to the IFC’s managed co-lending portfolio programme is helping the IFC expand access to financing for SMEs, women-led businesses, and climate-focused projects.

Emerging economies, and especially their SMEs, are often the hardest hit by the trade finance gap as a lack of collateral and low levels of capital make it difficult to get insurance or access financing. This makes it even harder to find investors and underwriters for green energy projects, which are often vulnerable to political risk and fast-shifting regulations. 

Insuring net zero

While much is said about the global trade finance gap, estimated at £1.87 trillion, the massive underinsurance of trade and assets is just as urgent an issue. An estimated £122 billion globally is underinsured, with the vast majority of it in developing countries, especially in the areas that are most vulnerable to climate-related risks.

Extreme weather events, global warming, and rising sea levels expose global trade to a range of risks, which are only set to rise in the next few years. Allianz Trade is incorporating climate and sustainability factors into its risk-assessment processes, for example, by introducing ESG criteria in country risk analyses. This will both provide a clearer, more accurate picture of the risks associated with projects and investments and encourage prospective clients to work on improving their ESG commitments. 

Starting this year, Allianz Trade will refuse new contracts and stop renewing existing policies with large oil and gas companies without a net zero commitment by 2050, as well as firms involved in the coal, oil sands, and methane exploration industries. 

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Trade credit insurance, which protects exporters and importers from the risks inherent to trade like delays and non-payment, is a crucial facilitator of the global economy. By decarbonising their portfolio, insurers can force markets to keep up with the transition to net zero and incorporate sustainability into their practices. 

Pushed by regulations and stakeholders who are becoming more and more aware of the opportunities of sustainability and the dangers of climate change, insurers and finance providers worldwide will follow Allianz Trade’s lead and incorporate ESG into their investment decisions. Net zero is for the benefit of profit incentives, the environment, and the future.

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Aterian, a London-listed metals-focused exploration and development firm, said on Wednesday, 23 April, that it had secured a trade finance agreement with a “global commodity trading and financial house” to fund mineral consignments in Africa.

The five-year trade finance facility is expected to help Aterian transition from an exploration-focused company to an operational trading entity, reducing its reliance on equity financing and accelerating expansion in its African operations. The trading facility will be used to fund tantalum, niobium, and cassiterite mining in Rwanda and its surrounding areas. 

Tantalum and niobium are critical raw materials known for their highly corrosion-resistant properties and used in electronics and metal alloys, while cassiterite is the principal source for tin metal. 

Aterian has been expanding its metals and minerals mining operations throughout Africa, with projects in Rwanda, Morocco, and Botswana. Its mission to remain scalable and grow sustainably has seen it prioritise partnerships: a joint venture with Rio Tinto to explore Rwandan lithium mining, established in 2023, is expected to produce results soon and may lead to the development of a combined lithium, tantalum, niobium, and tin mining operation in the country.

Aterian was established in 2011 to find and develop mineral mining opportunities across Africa and support ethical supply chains to support the transition to sustainable energy production. In January 2024, shortly after the Rio Tinto deal, the firm acquired a majority stake in Atlantis Metals, which holds mineral prospecting licenses for silver, copper, and lithium brine in Botswana. 

The firm’s stock on the London Stock Exchange has fallen by 28% over the past year, hitting a one-year low this month. Concerns over its supply chains and its reliance on Chinese imports have worried investors, especially in light of the US’s recent trade war with China and US President Donald Trump’s threats to impose further tariffs on rare minerals. 

The trade finance agreement comes as mineral exploration and trading are becoming global priorities. Trump has repeatedly framed military aid to Ukraine in terms of mineral mining, and the two countries are reportedly in the process of negotiating a deal on rare earth mineral licenses in exchange for further US support. 

Minerals and critical raw materials like lithium, tantalum, and niobium are becoming more and more crucial to the global economy as they are used in the production of microprocessors, quantum processors, and EV batteries. 

The mining and trade of these critical minerals will become increasingly important as new technology, especially quantum computing and AI, continues to grow; they will also be crucial to enabling renewable energy to expand at scale. 

However, their exploration and mining are fraught with geopolitical difficulties: several mineral-rich countries are embroiled in conflict, and many mineral mining companies are vulnerable to child labour and modern slavery accusations due to their complex, hard-to-monitor supply chains. 

Investment in mineral exploration firms, including through trade finance facilities, will become more and more important to supporting sustainable mining as the world’s economy becomes increasingly reliant on minerals’ potential. 

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• Criminals thrive when the environment they exist within is busy with turbulence.
• Sanctions and tariffs have led criminals to misdeclare or misinvoice goods and conceal the origins of shipments.
• AI-driven monitoring could help reduce how long criminals have to act.

Tariff wars and protectionism are opening lucrative new avenues for trade-based money laundering (TBML): and traditional compliance models can’t keep pace. Escalating tariffs and tightening economic sanctions have thrown global supply chains into turmoil, forcing businesses to rapidly shift trade routes and redraw commercial relationships. These rapid adjustments create blind spots that criminals waste no time exploiting.

Historically, waves of heightened tariffs correlate directly with a spike in TBML activity, and current trends are no different. When legitimate channels become restricted or prohibitively expensive, illicit networks thrive. Smuggling rings and fraudulent invoicing schemes proliferate, embedding themselves within the gaps left by fragmented enforcement. And TBML poses a particular problem: it is now estimated to be 10 times more efficient than other laundering methods for moving large sums internationally.

Late 2023 provided a vivid case study: despite sanctions, reports emerged of luxury cars and restricted microchips slipping into Russia through intermediaries in the UAE, China, and Central Asia. Now, with major economies again embroiled in escalating tariff battles, similar patterns are almost certain to repeat, particularly in sectors bearing the brunt of retaliatory duties. If compliance teams continue to rely on outdated detection methods, financial criminals will only accelerate their exploitation of an increasingly porous trade environment.

Governments have responded with aggressive sanctions. The US issued 2,275 new designations in 2022 and added another 2,500 in 2023, a dramatic increase compared to the 743 designations in 2021. While these measures are intended to cut off financial channels for criminal networks, they also encourage more creative evasion tactics. Goldman Sachs has warned that trade policy uncertainty is reducing investment and slowing economic growth, further disrupting supply chains in ways that criminals exploit.

For financial institutions (FIs), the warning signs are clear. When restrictions tighten, criminals do not stop trading. They simply adapt, using TBML techniques to move funds under the radar.

How TBML thrives in a protectionist economy

TBML is a complex and highly adaptable form of financial crime. Unlike traditional money laundering, which involves funnelling illicit money through banks or cash-based businesses, TBML hides dirty money within legitimate trade transactions. Criminals take advantage of sanctions and tariffs by misdeclaring goods, manipulating invoices, and routing shipments through third countries to conceal their origin. 

Classic methods include under- or over-invoicing, disguising high-value goods as lower-value items, and creating fake entities to serve as intermediaries. Trade diversion is another common tactic, where goods officially destined for one country are quietly rerouted to a restricted jurisdiction.

Gold-plated iron bars labelled as solid gold or vast shipments of silica sand that never officially leave a country’s records are just some of the creative methods used to manipulate trade flows. Or take the Black Market Peso Exchange which remains one of the most well-known TBML schemes, originally used by drug cartels to move proceeds between the US and Latin America.

Trade misinvoicing alone accounts for a significant portion of illicit financial flows, with some estimates suggesting it represents up to 80% of capital flight from developing nations. Despite enforcement efforts, FIs and regulators struggle to keep up with the scale and sophistication of TBML operations.

Organised crime groups are highly adaptable. When sanctions block direct transactions, they shift their laundering efforts to less scrutinised markets to stay ahead of law enforcement. China and Mexico are key hubs for illicit trade, with approximately $314 billion and $237 billion in suspicious activity reports, respectively.

Given the effectiveness of AI in generating fraudulent documentation and the increasing use of deepfakes in identity fraud, it is likely that criminals are exploring emerging technologies to manipulate trade transactions. Cryptocurrencies, which have been widely used in illicit finance, also present an attractive tool for obfuscating payments linked to trade-based schemes.

If these technologies are integrated into TBML at scale, they will further complicate detection efforts, making it even more difficult for FIs to identify and prevent illicit trade flows.

How FIs can rise to the challenge

For FIs, TBML presents an urgent challenge. Criminals are too agile for traditional, rules-based compliance models, and the complexity of global trade makes TBML detection difficult without the right tools.

What’s needed is a shift toward AI-driven monitoring, real-time risk assessment, and advanced data analytics.

AI-powered analytics can process vast amounts of trade data, identifying suspicious transactions in real time. Advanced algorithms can detect anomalies in invoices, pricing discrepancies, and unusual trade routes. Real-time vessel tracking enables FIs to monitor shipments and flag irregular movements that could indicate laundering activity. AI-driven pricing analysis helps institutions compare invoice values against market rates, revealing attempts to disguise illicit funds as legitimate trade.

A unified approach that integrates AI, trade monitoring, and regulatory intelligence is crucial. FIs that fail to act risk being left exposed, facing increased compliance pressures and potential penalties.

Already, 87% of FIs are adopting AI for TBML detection, with 91% prioritising automation. Continuous monitoring and AI-enhanced analytics dramatically reduce the time criminals have to exploit compliance gaps. They also reduce the burden of false positives, allowing compliance teams to focus on genuinely high-risk transactions. But adoption must accelerate if banks want to stay ahead of the threat.

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As sanctions, tariffs, and economic uncertainty increase, criminals will continue to innovate, forcing FIs to modernise or fall behind. The financial industry must move toward proactive, AI-driven detection, combining real-time risk identification with seamless cross-border data-sharing. Failure to act will result in more financial crime, regulatory penalties, and reputational damage.

FIs risk becoming the weakest link in the fight against financial crime. The time to act is now.

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The biannual report described decreased expectations of global GDP growth and rising volatility; policy uncertainty, geopolitical risk, trade barriers, and fragmentation unsurprisingly emerged as the main threats to trade in 2025 and beyond. 

Perhaps the most consequential finding of the report is a revision of past predictions of global GDP growth, which would have seen it slightly rise to 3.3% from 2024’s 3.2% and hold steady in 2026. Due to increased uncertainty and rising trade barriers, growth is instead now projected to slow to 3.1% in 2025 and 3% in the following year. 

This is driven by a significant slowing in US growth, projected to decrease by a full percentage point from its current level in 2026, and similar slowing growth in G20 countries. Developing countries will be the ones driving growth, with India, Indonesia, and Türkiye all rapidly increasing the size of their economies. Slowing growth may help decrease inflation globally, which remains above the targets set by central banks in many countries.

While uncertainty has been increasing worldwide, with consumer confidence hitting 2-year lows in much of the Americas, trade policy uncertainty has increased exponentially in recent months, the report found. This is likely related to President Trump’s tariff plans, which threaten to impose heavy duties on the US’s main trading partners in an effort to boost domestic producers and make trade fairer. 

After a series of false starts, in which tariffs against Mexico and Canada were quickly levied and just as quickly lifted, the Trump administration has promised a sweeping tariff regime to go into effect on 2 April, nicknamed “liberation day”. Mexico and Canada were most affected by the rise in uncertainty; these two countries, as well as the US and Brazil, experienced slowing growth in the past months, mainly driven by the services sector shrinking.

Increased tariffs aren’t just affecting uncertainty. The OECD predicts that tariffs were they to go ahead, will be “a drag on global activity” and “add to trade costs, raising the price of covered imported final goods for consumers and intermediate inputs for businesses”. This effect will be amplified in regions with highly international, integrated supply chains, as the North American market is, potentially multiplying the effect of tariffs and driving unprecedented supply chain transformation. 

On the flip side, the OECD report sees potential for sustained growth if tariffs were removed and technology harnessed to boost productivity. An optimistic prediction of high AI adoption with robotics integration is projected to add over 1.4% to annual labour productivity over 10 years, while a more modest prediction of high integration with adjustment frictions is still expected to add over 0.6%. The report also highlights the importance of encouraging competitiveness in domestic economies, a measure which has consistently gotten better over the past 6 years; the UK has maintained its position as the most competition-friendly of the countries surveyed. 

While the risk of tariffs and a retaliatory regime that might give way to an all-out trade war could be destructive, international cooperation could open the door to rising growth. Diversification, and strengthening supply chains will be a useful stopgap for firms affected by the tariffs and should be encouraged by national policies. However, a sustained effort to reduce fragmentation and multilaterally lower tariffs is the only thing that will bring the global economy back to sustained growth. Geopolitical risk, driven by conflicts in Europe and the Middle East and their effect on trade routes and energy prices, contributes to an undercurrent of volatility and uncertainty; developments in those conflicts or other simmering global conflicts could further contribute to rising or lowering consumer confidence and uncertainty.

The report paints a sobering but potentially optimistic picture for the months ahead. While fragmentation and tariffs are driving uncertainty and slowing growth, technology and cooperation can have a mitigating effect and contribute to higher productivity. 

The first takeaway from the report, then, is that once again, trade and tariffs dominate global economic developments; trade barriers and geopolitical risk can have destructive effects worldwide, but will also be the key to promoting growth. Unlike the global disruption brought on by the pandemic, which seemed like a sweeping, uncontrollable force, or last year’s geopolitical volatility that was hard to contain or predict, 2025’s global challenges are entirely within the international community’s control – as is fixing them. 

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Argentina announced yesterday it plans to deepen the Paraná, the continent’s second-longest river and a crucial shipping channel linking the South American continent to the Atlantic Ocean.

This comes just weeks after the country dropped export taxes for grains and oil on 27 January in an effort to help farmers hit by a drought which hit most of the country’s agricultural sector. 

These are the latest signs of a country at a crossroads: once a major crop exporter, crumbling infrastructure and a lacklustre economy are seeing Argentina lag behind more advanced neighbours like Brazil. 

Argentinian President Javier Milei announced yesterday that bidding was open for a 30-year contract to dredge the Paraná River, making the waterway deeper and wider. The Paraná is a river connecting Argentina’s major agricultural centres to the Atlantic, and is used to transport as much as 80% of all of Argentina’s crops travel on the river, many of which are destined for export. The Paraná also links Argentina to Brazil via the Rio Grande, linking Argentina to its most important trading partner. 

Despite its importance, and despite a booming soy trade doubling in size in the past 20 years, the canal has not been deepened since 2006. Soybean meal is Argentina’s largest export, along with related products like soy oil and other crops. The country’s large agricultural production and the Paraná itself, offering immediate transport from the field to a major waterway, was what attracted many producers to Argentina, making the country the world’s largest exporter of soybean meal. 

Now, however, degrading river conditions mean many ships can’t transit with a full load, instead needing to stop at a coastal port before continuing their travels on the Atlantic; despite precautions, about one ship a month gets stuck in river silt, causing long delays. Milei’s plans promise to widen and deepen the canal, facilitating trade, reducing delays and costs, and reassuring exporters that soy meal trade had a safe future in the country. 

However, just one day after announcing the auction for the contract to deepen the river, Milei closed the bid, accusing the only company who submitted a proposal of competitor intimidation. This is likely to delay even further plans which have been in the works for years, and frustrate producers who have already endured droughts, delays, and fears of sanctions. 

This comes as a drought in the middle of the Argentinian summer is hurting agricultural production across the country, where farmers are already struggling due to low global prices of key exports. The drought, caused by the same weather pattern that led to a 43% drop in agricultural production in 2023, could also bring the river to dangerously low levels, further impeding water transport of goods. To help struggling farmers and shore up foreign reserves, Milei announced in January that taxes on exports of oil and some agricultural products would be dropped until the end of the season in July 2025. Export taxes, as high as 30% for some of Argentina’s most important exports, have long been accused of stifling the economy and depressing foreign trade, but revenue from them is an important part of the Argentinian national budget. 

Milei, in government for just over a year, has been trying to make the country competitive again, and is now turning his attention to international trade as a way to strengthen the national economy. A far-right leader intent on balancing the state’s budget through austerity, some of Milei’s policies have come under fire for increasing poverty rates and removing social welfare. 

Among Milei’s proposed measures is dollarisation, which makes maintaining strong foreign reserves through trade all the more important. Milei’s election led to a surge in foreign investor confidence in Argentina, and his latest trade measures have seen Argentinian bonds surge in value.

As Trump’s tariffs threaten trade relationships and a potential break in the Israel-Palestine ceasefire could make trade routes dangerous again, international trade is getting more uncertain. This has led many countries to turn their attention to shoring up their own trade capabilities, especially to facilitate trade with their geographical and ideological neighbours. 

At the same time, infrastructural issues have plagued ports in the Southern Hemisphere, with South Africa gaining attention last summer for its overwhelmed ports breaking down and causing delays. Especially for a channel as crucial to trade as the Paraná, maintaining infrastructure in working order is as essential as macroeconomic tools to preserve stability.

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The world’s largest landlocked country also accounts for over 50% of Central Asia’s GDP, and has the region’s highest internet usage proportionate to its population. Some might be surprised by Kazakhstan’s emergence as a frontrunner in financial technology within Central Asia, but its preconditions made it a prime testing ground for these digital solutions.

The result of a deliberate focus on digital inclusion, infrastructure investment, and forward-thinking policies, Kazakhstan has become a prime example of how developing economies can turn to fintech to address long-standing challenges and create new opportunities.

Laying the groundwork for fintech success

Kazakhstan’s rise as a fintech hub began with investments in robust digital infrastructure and the population’s digital literacy. By 2023, internet penetration in the country reached an impressive 92.88%, roughly equivalent to Germany (92.48%) or Finland (93.51%), according to data from the World Population Review. Mobile technology adoption is also high, with over 91% of Kazakhstani aged 15 and older having a mobile phone with internet access as of 2021.

This digital acuity also reached Kazakhstan’s financial sector. Active online banking users surged nearly five-fold between 2019 and 2023, rising from 5 million to 23.1 million. The number of cashless transactions also expanded dramatically, rising from $5 billion in 2017 to $158 billion in 2022, achieving a 98% CAGR. 

While necessary, consumer behaviour is not the only factor driving the nation’s financial digitalisation. Legislative initiatives, including the 2023 Digital Assets Law, have created a supportive regulatory environment, which has allowed the banking sector to actively embrace fintech advancements. 

By 2024, 31% of financial institutions had implemented artificial intelligence (AI) technologies for fraud prevention, cybersecurity, and service personalisation. Major banks began acquiring promising startups to enhance their digital capabilities. For instance, virtual cards now comprise 37% of total card issuance at leading banks, and 90% of transactions are now cashless.

Reaching the unreachable: Innovating for financial inclusion

Kazakhstan faced a familiar challenge shared by many developing economies: financial services were out of reach for large portions of its rural population. However, the country’s fintech sector turned this challenge into an opportunity to innovate. 

In 2023, Kazakhstan launched the world’s first digital tenge payment card through a partnership with Visa, the National Payment Corporation, and leading banks (Halyk, BCC, Altyn Bank). This technology allowed individuals in remote areas to access financial services without requiring a physical bank branch. Programmable digital tenge has been directed towards railway investment as of July 2024, as part of the second stage of the country’s CBDC implementation. Firms developing biometric identification systems and mobile payment solutions are further promoting financial inclusion by bridging the gap for those in geographically isolated regions, providing them with secure and convenient access to digital financial services. 

Other developing economies can draw a powerful lesson from Kazakhstan’s approach: when technology addresses specific local challenges, it becomes an engine for social and economic empowerment.

Policies paving the way

Government policy decisions play a major role in shaping the business landscape of the jurisdiction being governed. Thankfully for the nation’s fintech sector, Kazakhstan’s government has been following a strategic vision rooted in policy innovation. 

In 2017, recognising the importance of digital literacy as a foundation for further fintech developments, the “Digital Kazakhstan” program was introduced. This enabled paperless documentation, introduced a “single window” for export-import operations, blockchain-powered VAT accounting, and digital tools to support SMEs with automated monitoring and transparent state assistance. 

“Digital Kazakhstan” laid the foundation for the “Digital Transformation Concept,” introduced by the government in 2023. This was a comprehensive roadmap to foster digital and financial advancements. The National Bank of Kazakhstan launched a regulatory sandbox for testing innovative financial products.

This government approach had the dual benefit of promoting the fintech sector domestically and attracting international investors. The Astana International Financial Centre (AIFC) – a financial hub based in Astana, Kazakhstan and launched in 2018 –  offers a special legal regime tailored for fintech companies. 

This move has signalled that Kazakhstan is open for business. The fintech sector has attracted $32 million in venture capital investment, a staggering 40% of all venture capital flows into the country, and a significant increase over the $10 million attracted in 2022. 

The dual challenge of growth and security

As Kazakhstan’s fintech sector has expanded, the risks associated with cybersecurity have grown in tandem. Financial organisations were targeted by cyber attacks in 12% of cases during 2023. The consequences ranged from operational disruptions to significant financial losses. 

Recognising the urgency of these threats, Kazakhstan launched “Cybershield Kazakhstan,” a national programme designed to bolster digital defences and train security specialists. Beyond managing internal risks, Kazakhstan also strengthened its position as a regional leader in fintech through deliberate collaboration with neighbouring countries. Partnerships with Russia, China, and other Central Asian nations have focused on developing shared digital payment systems and advancing the potential of cross-border financial technologies. Cooperation with international financial centres in Dubai and Singapore continues to expand.

By addressing security concerns while building regional alliances, Kazakhstan has created a case study for how a country can grow its digital economy sustainably while remaining abreast of the challenges of a digital economy.

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Developing economies are in a somewhat advantageous position in terms of digital adoption. Their financial institutions are unencumbered by centuries-old infrastructures; innovation is not regarded as revolutionary, with all the rhetorical baggage that comes with discarding the old. That is to say, developing economies have little to dismantle when paving the road for digitalisation. 

Kazakhstan’s journey from a resource-dependent economy to a fintech leader offers valuable lessons for developing nations worldwide. By prioritising digital infrastructure, addressing rural financial inclusion, implementing supportive policies, and tackling cybersecurity challenges, the country has positioned itself as a model of what targeted innovation can achieve. 

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COP29 has earned the nickname “finance COP” for its discussion on regulations, investment, and ways to finance the green transition, especially for small and medium-sized enterprises (SMEs) and developing countries. 

The goal of this year’s COP was to approve a New Collective Quantified Goal (NCQG), defining the amount and terms of the financial support rich countries were to give to developing nations to meet their climate goals. However, negotiations faltered. On Sunday 24 November, it was agreed that developed economies would pay developing countries $300 billion a year by 2035 to help insulate themselves from and adapt to climate change.

This has been heavily criticised by the ‘least developed countries’ (LDCs) group, who walked out of discussions along with the Alliance of Small Island States (AOSIS), not only for its amount but also for its last-minute announcement agreed yesterday in overtime.

Beyond the main negotiations, however, some progress has been made. The newest versions of countries’ Nationally Determined Contributions (NDCs) set ambitious goals for emissions reduction and universal standards for carbon credits; the NDC 3.0 guidelines put small businesses front and centre in national climate finance strategies; and efforts to put climate tariffs on the agenda drew attention to the controversial issue. These could all be consequential to the world of trade and trade finance, putting sustainability at the forefront while raising the issue of the compromise between free trade and the climate.

Ambitious climate targets, and concrete ways to reach them

COP29 saw nations publish new and ambitious climate goals, with the UK announcing a new target of reducing emissions by 81% compared to 1990 levels by 2030 and being the first developed country with a decarbonised power system by 2030. While NDCs by the UAE and Brazil fell short of expectations, notably missing a commitment to phase out fossil fuels, there are high hopes that other developed countries will emerge as frontrunners in the fight against climate change.

As well as the NDCs themselves, COP29 saw the announcement of the NDC 3.0 Guidelines, a set of policy recommendations to help countries include small and medium enterprises in their climate strategies. SMEs are responsible for 64% of global business emissions but often miss out from climate programs because of a lack of information, excessive bureaucracy, or difficulty accessing funding. The Guidelines play a crucial role in involving SMEs in the fight against climate change, accelerating the climate transition while leading to sustainable, equitable economic growth. 

SMEs, which will be at the centre of next year’s COP30 in Brazil, also saw a landmark declaration by Azerbaijan, Brazil, and the International Trade Centre, the UN’s trade agency. The Joint Declaration on Baku Climate Coalition for SMEs Green Transition, signed last week, aims to help small businesses understand and adapt to climate regulation, paving the way for COP30’s focus on the sector. 

A consensus on carbon credits

COP29 opened with an agreement on standards for the creation of carbon credits, and tradeable permits tied to greenhouse gas emissions used by governments to measure and limit emissions. 

The agreement, announced on the first day of the conference, sets out clear standards and regulations for carbon credits, enabling global cross-border trade. Under the new system, a unified standard would define a carbon credit and determine its value; the credits would be traded on a single market under UN supervision. 

If finalised, this could have a great impact on global trade and finance. Universally tradeable credits could mean, for example, that a small Gulf nation can set ambitious climate targets and meet them by effectively financing a carbon sink on the other side of the world through carbon credits; individual companies can respect climate goals without inhibiting growth under the new system, and emissions reporting at every level would be much easier and more accurate. 

Carbon credits, then, could lead to a significant increase in climate project-related cross border trade and foreign direct investment, as well as more corporate accountability and transparency on emissions. 

Climate tariffs: a contradiction in terms? 

A more contentious topic this year was trade restrictions, with developing countries accusing the West of setting climate-linked border taxes that are so restrictive they effectively amount to protectionism. Measures such as the Carbon Border Adjustment Mechanism (CBAM), introduced by the EU in 2023 and recently announced to be a key part of the UK’s climate strategy, impose tariffs on foreign goods that have been produced through carbon-intensive methods. 

The taxes are intended to reduce carbon leakage, which occurs when climate guidelines lead to carbon-intensive goods being imported from abroad, effectively localising rather than reducing emissions; by applying domestic regulations to imports, the CBAM should reduce overall emissions and ensure fairer competition. Critics, especially from developing economies which export to Western Europe, say unilateral measures like the CBAM unfairly target their products and impose unreasonable, overly complicated reporting standards. 

A similar EU measure set to ban imports of commodities linked to deforestation set to go into effect in 2025 was postponed earlier this month after complaints from within and outside the bloc. The ban, which would have affected imports of soy, beef, cocoa, and palm oil, among others, was criticised for excluding small farmers who rely on exporting to the EU and imposing unreasonably strict standards on firms. 

These discussions on climate-linked border controls are representative of the tension between promoting trade and economic development while also reducing emissions and preventing climate collapse, a common theme at this year’s conference.

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Overall, COP29 shows the international community’s commitment to both goals and gave rise to important steps to include every player, especially SMEs, in the climate transition. What was lacking was a set of binding rules on climate finance and trade, which could have accelerated the climate transition and encouraged businesses to take green finance more seriously.

Geopolitically, it is essential to keep countries united on climate. The argument between rich and poor countries on topics as sensitive as funding left a bitter taste and a murky future outlook, particularly with President Donald Trump’s arrival next year, a known climate sceptic.

COP30, which will be held next year at the border of the Amazon rainforest, could be an opportunity to strengthen the commitments to SMEs and carbon credit reporting standards while making real progress on achieving the goals set out in the Paris Agreement. 

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According to exit polls, 31% of Americans cited ‘the economy’ as their biggest concern when voting – the second highest factor after 34% responding ‘state of democracy’. Trump’s popularity must, in part, be attributed to his economic focus and naturally aggressive ‘American first’ instinct.

His proposed ‘Maganomics’ agenda threatens to reshape the global economic landscape in ways not seen since the 1930s, with potentially seismic implications for international trade, treasury operations, and cross-border payments. 

But it’s yet to be seen whether his hardline proposals will play out, and whether the international trade network and its facilitating components will change at all – particularly because of Trump’s relative resistance to digital payment methods, compared with his former opponent, Kamala Harris.

Can the Great Tariff Wall protect American industry?

The cornerstone of Trump’s economic vision – a universal 10% baseline tariff on all imports combined with punitive 60% duties on Chinese goods – would effectively erect the highest trade barriers in nearly a century. The primary concern of this radical protectionist stance, from an international perspective, is its potential to trigger retaliatory responses from trading partners.

These measures could also create new inflationary pressures just as central banks have begun to tame price growth, to the detriment of American people and global supply chains.

Simultaneously, Trump’s proposal to lower corporate tax rates for domestic manufacturing to 15% through a 28.5% domestic production activities deduction, while simultaneously imposing sweeping tariffs, presents a complex challenge for treasury markets. Tax Foundation analysis suggests these policies would increase the US debt-to-GDP ratio from 201.2% to 223.1% on a conventional basis, potentially straining government financing capabilities at a time of already elevated interest rates.

While Trump promotes tariffs as a revenue generator, economists warn that the income would fall far short of offsetting the tax reductions. Particularly since, from the Tax Foundation study, even a modest 10% retaliatory tariff plus targeted Chinese countermeasures would erase two-thirds of any economic gains from the proposed tax cuts.

This fiscal expansion comes at a precarious time, with interest payments on federal debt reaching $659 billion in 2023. The contradiction between revenue-reducing tax cuts and increased spending needs could force difficult choices about government funding or risk further deterioration of America’s fiscal position.

Will USD keep the payments throne?

In theory, the implications of Trump’s proposed tax cuts, increased spending, protectionist agenda, and pressure on the Fed to maintain artificially low rates could have profound implications for the US dollar’s reserve currency status. With America’s interest payments on its nearly $36 trillion debt now exceeding defence spending at $763 billion annually, international confidence in the greenback is somewhat undermined. Market participants are already pricing in significantly higher long-term rates, suggesting growing skepticism about the sustainability of such policies.

The proposed mass deportation of workers, combined with aggressive reshoring policies, threatens to create inflationary pressures that could destabilise existing trade finance arrangements. Previous experience suggests the Fed’s independence might be compromised under political pressure, as evidenced by Powell’s 2019 policy shift following presidential criticism.

With commodities and most global currencies priced in dollars, any erosion of confidence in US monetary policy could accelerate the search for alternative payment mechanisms and reserve currencies. 

Changes to the US dollar’s position will be more rhetorical, rather than challenging the currency’s unassailable prominence statistically. May 2024 SWIFT data reveals that the US dollar accounts for over 80% of trade finance, for its prominence in invoicing and settling commodity trade. It also accounts for nearly 60% of FX reserves.

Having said this, the presidential candidates varied greatly in their outlook on trade and payment digitalisation.

As vice president, Harris’ attempted to expand the US Digital Service (USDS), presaging an expansion had she taken the presidency. The agency, established under former President Obama to support the Affordable Care Act’s technology infrastructure, has developed capabilities that could underpin a digital dollar initiative. Before the White House, while serving as Senator, Harris bid to increase USDS funding by 400%. 

In contrast, Donald Trump has characterised central bank digital currency (CBDC) as “very dangerous” and “government tyranny”. This perspective means the US is likely to continue lagging behind the 134 other nations exploring CBDC development worldwide.

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Models and studies are speculative. 

Nonetheless, for American citizens, a report commissioned by the US-China Business Council, Oxford economists predict more than 700,000 job losses and a cost of over $1.6 trillion to the US economy as a result of the China tariffs.

For businesses and investors, the implementation of such policies could fragment the global economy into competing trade blocs, shifting decisively away from the post-war liberal economic order.

And for global stability, threatening Nato in February this year, Trump has made clear that his aggressive decoupling strategy in trade, treasury, and payments, will define the geopolitical trajectory for at least the next few years – but likely far beyond.

The post How President Trump might affect trade, treasury, and payments appeared first on Trade Finance Global.

Lloyds Bank has introduced a new digital solution to simplify the application process for guarantees and standby letters of credit (SBLCs). While available for all Corporate clients, the solution is particularly beneficial for small- and medium-sized enterprises (SMEs) and mid-sized corporates.

Out with the old, in with the new

In line with the market norm, in the past clients at Lloyds Bank had to fill out a PDF form for most guarantee applications. This manual process often led to delays and inefficiencies in the issuance of new guarantees.

Jon Boran, Director at Lloyds Bank, said, “When clients fill in a static form, they may miss some required information, particularly when fields are not conditioned based on previous inputs, leading to incorrect or incomplete applications submitted to the bank. This often results in frequent back-and-forth communications to correct mistakes, which can be time-consuming and frustrating for our clients.”

The new intuitive digital form addresses these issues by integrating automated checks and validations. Boran said, “We’ve built context based prompts into the digital application forms so that users can be sure they have completed all the necessary information before electronically signing their application.

“If you are not the signatory, you can refer the application to someone else, they will receive an email and a one-time passcode to sign the form. Each field in this form is connected to our back-end systems, which include our workflow system and our processing system.”

This integration ensures that data is accurately transferred, reducing the need for manual intervention and speeding up the issuance process.

The journey to digital guarantees: applications and issuance

The Digital Guarantee Issuance (DGI) initiative is another step towards Lloyds Bank’s goal of digitising trade finance building upon the market-leading adoption of Digital Collections, Digital Promissory Notes and Electronic Bills of Lading (eBL). DGI will allow clients to request digital issuance of guarantees and SBLCs directly to the beneficiary or applicant, ensuring instant delivery and with no reliance on paper.

Boran said, “Over 80% of the guarantees we issue are sent directly to the beneficiary rather than via a correspondent bank and, in the vast majority of cases, these undertakings were issued on paper given that the beneficiary was not on the SWIFT network. We were keen to offer our clients an alternative to paper that was simple, faster and removed the need to courier documentation around the world.

Since its introduction in 2022, the initiative has gained traction, with many clients opting for digital issuances. Boran identified that one-third of these guarantees were issued digitally rather than on paper and that volumes are increasing month-on-month.

Digitally issued guarantees reduce the cost of courier fees and accelerate delivery timelines, benefitting clients and the bank across the entire spectrum.

Comparison with market practices

Lloyds Bank’s approach aligns with broader industry trends and other major banks are beginning to adopt digital solutions for guarantees, but the banking industry as a whole is at varying stages of embracing digitalisation of guarantees. Some banks still require a paper, wet-signed application and have no digital delivery other than SWIFT, while other banks have embraced digital at every touch point.

The solutions needed for a digital transition are also likely to vary from market to market. Jurisdictions that maintain a register of guarantees or require presentation of an original for cancellation are likely to have different requirements than jurisdictions where possession of an original is not key. For the latter, simple e-signed PDFs will likely suffice.

Lloyds Bank maintains that, in most cases, possession of a guarantee is less relevant under English law. Boran elaborated, “These days, we rarely see clauses that require guarantees to be returned or submitted alongside claims for payment.”

Lloyds Bank focuses on eliminating the need for physical possession given that the beneficiary’s knowledge of the terms of the guarantee should be sufficient, in most cases, to allow them to make a claim. This enables process simplification and aligns with the bank’s digital strategy.

Making documentary trade cheaper, faster, and more efficient

The manual process of handling guarantees often leads to delays, inefficiencies, and errors. By digitising the application process, Lloyds Bank aims to minimise these issues.

The new digital application form includes various rules and checks to ensure all necessary information is provided upfront, reducing the likelihood of omissions and the need for additional communication to correct mistakes.

Lloyds Bank has also incorporated features to make the process more user-friendly, including extensive help and support text throughout the digital forms available to clients and non-clients.

Surath Sengupta, Managing Director, Head of Trade and Working Capital Innovation and Transformation at Lloyds Banking Group, said: “In trade, over the last few years, Lloyds Bank has made great strides in simplifying and digitising customer journeys, delivering innovative and pioneering solutions, by harnessing new technologies and legal frameworks. 

“From delivering our landmark digital transactions in the documentary trade space to launching our Trade Tracker, which gives clients real-time visibility of their transactions, our focus has always been on solving our clients’ pain points. 

“We have co-created with our clients an end-to-end digital journey for our Guarantees offering, making it simple and intuitive to self-serve from the first point of enquiry through the issuance and all the way to cancellation.”

Case study: ABTA

The Digital Guarantee Issuance (DGI) initiative has already shown promising results. 

For example, ABTA, the largest travel trade body in the UK, has transitioned to the paperless format for managing guarantees. 

Rachel Jordan, Director of Membership and Financial Protection at ABTA, said, “We’re always looking for new ways to deliver sustainable, efficient, and cost-effective services to our members, so we’re really excited about our new paperless arrangement with Lloyds Bank.” 

This change is expected to eliminate at least 3,500 pieces of paper annually, demonstrating the new system’s environmental and operational benefits.

ABTA are one of numerous high-volume beneficiaries in the UK which have agreed to accept Lloyds Bank’s DGIs on a blanket basis.

Could GenAI help?

Looking ahead, Lloyds Bank is exploring using generative artificial intelligence (GenAI) to further enhance its offerings. GenAI may be able to automate the review of guarantee texts, which could standardise the process and reduce inconsistencies. 

This would be an extension of the bank’s ongoing efforts to integrate technology into its trade finance operations and will build on the digital automation partnership announced between Lloyds Bank and Cleareye earlier this month. 

Additionally, Lloyds Bank is considering integrating its systems with external platforms to streamline the process further and provide flexibility to adapt to clients’ evolving needs. Boran said, “We have developed inbound and outbound APIs across the key traditional trade products that we can use to connect our core processing system with various platforms should there be a client need for this.” 

Lloyds Bank’s Digital Guarantee program reveals how digital solutions can improve operational efficiency, reduce costs, and provide a better client experience. 

By leveraging technology, Lloyds Bank is making significant strides in streamlining the guarantee’s end-to-end customer journey, benefiting SMEs and mid-sized corporates engaged in global trade.

The post Lloyds Bank is re-imagining Guarantees and SBLCs in the digital age appeared first on Trade Finance Global.

TFG’s Deepesh Patel will speak with Ravi Amin, Trade Compliance Subject Matter Expert, at S&P Global Market Intelligence to break down the intricate dynamics of global trade sanctions and the role of transshipment hubs in facilitating the movement of Western-made components to Russia. 

Key webinar highlights:

• Background and effectiveness of the sanctions: Ravi Amin will share his expertise on how despite numerous rounds of sanctions since the onset of the conflict with Ukraine in 2022, Russia has managed to sustain its trade flows. Additionally, the webinar will cover how Russian trade has been redirected through Asian countries and neighbouring states like Kazakhstan, Armenia, and Uzbekistan, which have seen an increase in trade with Russia despite global sanctions.
• Sanctions and compliance: The webinar will break down the evolution of sanctions, starting with critical military components like semiconductors and expanding to luxury civilian goods, along with the list of HS Codes and sanctions tiers.
• Future outlook: The session will also provide projections on future sanctions, potentially targeting new sectors of the Russian economy. This segment will discuss the broader implications for global trade and the necessary adaptations within international trade finance.

With over 4,000 sanctions currently levied on the Russian economy, it is important to understand what these sanctions are, how they work, and what is being done to enforce them.

Trade professionals, freight forwarders, banks, compliance officers, and many more need to ensure they know the intricate details to avoid working with sanctioned entities.

Listen in on the TFG and S&P Global Market Intelligence webinar to make sure you don’t miss out on any of these details!

Sign up for the webinar here: https://www.tradefinanceglobal.com/posts/navigating-sanctions-the-role-of-transshipment-hubs-in-western-made-components-to-russia/

The post Trade Finance Global and S&P Global Market Intelligence to host a webinar on “Navigating sanctions: The role of transshipment hubs in Western-made components to Russia” appeared first on Trade Finance Global.