Get Focus insights straight to your inbox


Please complete all required fields before sending.

Thank you

We look forward to sharing out of the ordinary insights with you

Sorry there seems to be a technical issue


The word ‘sustainability’ is often synonymously used with ESG, however these are two entirely different concepts, especially from an African perspective. To understand why, we need to re-look at the UN’s Sustainable Development Goals (SDGs) to understand what “sustainability” actually encompasses and see sustainability from the perspective of a developing economy.   

It is trite to observe that life is more difficult for people in developing economies than developed economies – that’s what begat the principles behind the SDGs in the first place. The consequences of recent global events like Covid, the Ukrainian/Russian war etc. have, however, resulted in a downward economic spiral that will reverse much of the growth that these developing economies enjoyed in recent years. 

A troubling new nexus has emerged between the increased debt sustainability concerns in developing economies and their financial sectors’ ability to service their real economies.  Global regulation, which should be the lever that policy makers use to incentivise sustainability improvements, is confusingly directed against it.  If we can differentiate ‘sustainability’ in the context of a developed economy vs a developing economy, there is great opportunity for African trade finance to practically deliver sustainable development where it is needed most.

Sustainable Finance Regulation

As we have previously argued and as the ITFA White Paper on African Sustainable Trade Finance outlines, we need to reframe the sustainable finance principles for developing economies. The existing ESG / sustainable finance frameworks, standardisations and KPIs – effectively ESG ‘regulation’ cannot be implemented globally as if one size fits all.

We need to recalibrate it for developing economies so that we don’t unintentionally completely counter the SDGs and significantly worsen the lot of the populations of these economies. We cannot simply ignore the relevance of the Sustainable Development Goals and the reasons for which they were intended. 

It makes perfect sense that there is a fixation in a developed economy on the ‘Environment’ and Paris Agreement targets in their provisional ESG standardisation frameworks– their societies are prosperous, not developing, and their people are not starving and suffering.  Their proximal existential threat is future climate catastrophe. 

The sustainability regulation being crafted by them has great potential to incentivise reduction in pollution and carbon emissions, which is, understandably, their biggest concern.  The problem is that, like Basel, these regulations will be imposed on developing economies as well whose people’s proximal, immediate existential threats are failing economies, starvation, poverty and real human suffering.

There are 30.7 million micro small and medium enterprises (“MSMEs”) in Nigeria alone and, as pointed out in the IFC’s 2022 report on Trade Finance in West Africa, poor access to trade credit is the problem hampering economic development in the region. 

What hasn’t been explained is that those MSMEs who employ 90% of the population and are the realistic route to sustainable development are being starved of trade finance because of western confirmation biased regulation being globally implemented without due regard to contextual differences in economies:  first Basel (which is about to compound the disaster it forged in emerging market transactional banking with Basel IV) and now, the coming EU and SEC sustainable finance regulations, which will hamper crucial developing market trade finance.  

Sustainable Debt in Developing Economies

According to the IMF-World Bank debt sustainability framework for low-income countries (LIC-DSF), as of March 2021 (courtesy of Covid), more than half of LICs were at high risk of or in public debt distress and these solvency or liquidity problems would force some form of debt restructuring to restore debt sustainability. This was BEFORE the invasion in Ukraine, skyrocketing global inflation, increased interest rates, and huge debt service burdens of developing economies… 

Since then, we’ve seen clear evidence that the borrowing at zero Fed rates, with trillions of cheap dollars being made available to governments in developing markets has become unsustainable:  their currencies have devalued, domestic inflation has spiked through 50%, and debt-to-GDP and exorbitant servicing costs have become untenable.   Ghana is a prime example, they are now forced to restructure their debt, under IMF instruction.

Percentage of global trade that needs trade finance

So what has this got to do with sustainable trade finance?  Over 80% of global trade needs trade finance and all subsistence trade imports must be enabled by trade credit and dollar liquidity.  When Developing  Market sovereigns are forced to restructure their domestic debt, they run the gauntlet of what the IMF calls ‘financial repression’ in their 2021 paper ‘Issues in Restructuring of Sovereign Domestic Debt’, severely damaging their financial sectors. 

African banks hold the majority of the issued domestic government securities as HQLA (High Quality Liquid Assets) regulatory capital.  As we can see in Ghana, a debt restructuring tends to lead to an IFRS9 accounting standards devaluation of the bonds on the banks’ balance sheets, and this then threatens to wipe out their equity and make them technically insolvent – prompting a systemic collapse and making their banks trade finance pariahs.  

African countries don’t export enough US dollar denominated goods and therefore the nuts and bolts of USD trade finance liquidity in developing economies is crucially dependent on international banks. Because of this critical dependency between importer banks in developing economies and international banks in developed markets, we cannot ignore the unintended consequences of western regulations being imposed in developing economies. That’s why global sustainability and banking regulations are too important to not include African input.

Sustainability definitions

Valiant attempts to forge global standards and definitions for sustainable trade finance are being attempted by BAFT, ITFA and the ICC trade industry bodies.  Provisionally, they start with ESG Green and Social bond-derived standards designed from their home market debt transactions. Unfortunately, these standards are simply not appropriate for Developing Market trade finance, which is very different to debt. Trade finance is too gaseous to be caught by the existing debt ESG standards’ net and we therefore need to go back to the SDG principles.

In its September GTR article, the ICC acknowledges that “trade is ‘critical’ to achieving SDGs” and counters the Coriolis assessment that the majority of global trade currently contributes negatively to the SDGs – the problem is basically one of reductive interpretation.  If the SDGs are meant as a blueprint for human flourishing, then the developmental benefits of trade in developing markets and the principles informing standardisation regulation are intuitively obvious.  Squaring the circle of the inherent conflict of development and environment is the challenge.

In November 2022, the global population passed eight billion.  In the last 40 years the proportion of the population living in poverty has reduced from 40% to under 10%, largely due to China and India’s economic development lifting their populations out of destitution.  Importantly, this transformation was largely driven by fossil fuels, as can be seen in China and India’s contribution to global emissions. 

The evolution of global poverty, 1990-2030’ reports that “today’s (and tomorrow’s) poverty is largely found in sub-Saharan Africa”, and “Nigeria is now the face of poverty”.  SDG 1 – no poverty, is actually getting much worse in Africa notwithstanding the 2030 Agenda for Sustainable Development which recognises that “ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests”.

This clearly implies there must be a balance, taking into account ALL the SDGs and that one SDG is not more important than the other. They go “hand-in-hand”. We need to re-evaluate the principles guiding SDG interpretation for ‘sustainability’ as a whole, based on all 17 SDGs rather than focusing on the E in ESG. The four environmental focused SDGs (7,13,14 & 15) represent all future generations’ human flourishing through environmental action, delivering a liveable planet in the future as their goals.  Africa’s population is starving and dying now. Like India’s and China’s, Africa’s sustainable development, to ensure a future for its population, is inevitably going to come with some CO2  – surely this can be accommodated during this “just transition” phase taking into account the current contribution by developing economies to carbon emissions? 


It’s not all doom and gloom… If we can reframe and inclusively interpret the SDGs’ ‘sustainability’ concept for developing economies, we can engender the sustainable development of millions of people, present and future, through promoting African trade finance.  With such a ‘sustainability’ construal we could practically invoke SDG 17 (Partnerships for the Goals) and forge partnerships between the multilateral and developmental agencies, African banks and international banks and alternative fund investors to implement real sustainable development through trade finance.  

About Investec

Investec Corporate and Institutional Banking is a division of Investec Bank Limited registration number 1969/004763/06, an Authorised Financial Services Provider (11750), a Registered Credit Provider (NCRCP 9), an authorised Over the Counter Derivatives Provider, and a member of the JSE. Investec is committed to the Code of Banking Practice as regulated by the Ombudsman for Banking Services. Copies of the Code and the Ombudsman's details are available on request or visit Investec COBP.