TXF Stages for Change 2021
Calling all changemakers in trade & export finance! Join us to plot your ideas about diversity, sustainability and inclusion in the industry.
Commodity finance comprises two key products. The first is commodity-linked loans in the agriculture, oil and gas and mining industries where the lender has the future production or reserves of the commodity as security. These types of deal can be reserves-based loans, pre-export facilities, prepayment facilities, or even streaming, royalty-based loans and factoring. The second are very large unsecured term loan and revolving credit facilities provided annually by commercial banks to the major commodity trading houses and producers – Glencore, Gunvor, Trafigura, Vitol, ADM, Bunge and Castleton for example. These loans, effectively working capital facilities, also enable the major traders to provide loans to commodity producers that lack liquidity, thus ensuring security of commodity supplies and additional profits from that lending due to the arbitrage between the cost of debt for the major traders and what they can on-lend at.
Hydrogen projects are ballooning given the stronger focus on energy transition from policymakers and energy majors in the wake of the pandemic. But where’s the level of support from governments – regulatory and financial – that will make green and blue hydrogen commercially bankable?
For all of the benefits that rising anti-financial crime (AFC) compliance standards have conferred to economies across the world, they have not come without significant downsides for nations that lack the capacity to meet them. The unwillingness of western banks to expose themselves to regulatory risk, coupled with the need for greater partnerships, are just two of the headwinds to building AFC capacity.
Government-led mandatory ESG reporting needs to evolve globally into a more stringent and standardised framework to push commodities trading corporates, first movers in the nascent sustainability-tied debt space, towards greater ESG transparency – for the benefit of all stakeholders.