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Cambridge Institute for Sustainability Leadership (CISL) takes Banking Environment Initiative work on sustainable commodity trade to Indonesia and China

last modified Oct 06, 2016 08:52 AM
21 March 2016 – At the invitation of banking regulators in Jakarta and Beijing, the CISL team and Banking Environment Initiative (BEI) banks recently convened in Indonesia and China to work with local partners to increase the sustainability of the palm oil trade.

It is the BEI’s ambition to help tilt global agricultural commodity trade flows towards sustainable models because of their large carbon footprint and social justice issues.

For some agricultural commodities like palm oil, China and Indonesia are two of the main demand-side and supply-side countries in the world. With 49 per cent of global production, Indonesia is the largest palm oil producing country in the world. China is its second largest trading partner, as shown in the figure below. Therefore, working with local partners in these major countries is key to the BEI attaining its ambitions.

Where does Indonesia export Palm Oil to? (2014)

 

Published under a Creative Commons Attribution-Sharealike 3.0 Unported License from the M.I.T. Observatory of Economic Complexity – Alexander Simoes, Dave Landry, César Hidalgo, Melissa Teng

Sustainable trade finance for Indonesia

In Indonesia, the local partners (consisting of the banking regulator, five local banks and two of the largest palm oil producers/ traders in the world) embraced the opportunities that the BEI’s concept for a sustainable trade finance product offers. Together, various new ideas for how this concept could be put to good use to stimulate both ecological sustainability as well as economic development in Indonesia were developed.

Chinese imports ecologically sustainable

The Chinese leg of the trip consisted of a workshop with Chinese banks, regulators and academics about why and how the Chinese import of agricultural commodities should become ecologically sustainable. This works has been openly endorsed by the Chinese banking regulator, something which carries much weight in China.

BEI BeijingWorkshop participants reached a joint understanding that the process of transition to sustainable modes of production for soft commodity industries is already underway but could continue in a ‘disorderly’ manner, increasing the likelihood of a variety of credit and macroeconomic risks. The participants therefore identified a number of mitigating actions to manage this transition process, some of which already have been implemented at major Chinese banks. Examples of these actions include integrating environmental standards into credit policies, thus driving pricing strategies for trade finance and strengthening IT and data systems capacity to deal with green finance information flows.

BEI member banks and CISL are now working with Indonesian and Chinese partners to deepen such collaboration.

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