Legal & Regulatory News

ITFA research paper: Towards a common audit standard for sustainability reporting in trade and supply chain finance

The International Trade & Forfaiting Association’s ESG Committee has published a report authored by Dr. Rebecca Harding which expands on the challenges of regulatory sustainability reporting in the international banking and trade finance space.  This latest research paper suggests significant divergence in common reporting practice across major trade and supply chain banks.  Whilst regulatory reporting standards are starting to become clearer, the divergence of reporting practice identified in the research suggests that the “how” to comply and “what” to measure is not.    

This research paper follows on from an earlier ITFA report on sustainability reporting published in May 2023.  That report identified the need to establish a separate and independent entity focused on creating common, consistent and comparable audit standards for sustainability reporting.  It was suggested that this could be structured as a UK-based Community Interest Company called the Sustainable Trade Foundation (“STF”).  

The latest research identifies a “regulatory paradox” in sustainability reporting requirements due to the short-term and risk-based approach to reporting standards.  The report suggests that the lack of clarity on reporting requirements from regulators is exacerbating this regulatory paradox.  Action is therefore needed to allow the STF to work across the industry to look at the “what” and “how” of regulatory reporting by setting the common audit standards and developing the methodologies for measuring those standards through a data repository which has the capacity to model sustainability-related financial risk. 

The paper calls on the industry to work together to define common standards (with the standards being published by the Sustainability Accounting Standards Board showing real promise) and collect data which can then be presented to regulators in a uniform and standardised way. 

Click here to read the paper.  Please contact ITFA if you would like to discuss the paper.