Supporting Trade in a time of crisis

The wider picture Finally, while the pandemic is creating a new environment for trade, the sector must not lose sight of its recently-acquired supply chain sustainability goals. Citi continues to be a major advocate of sustainability within supply chains – with all counterparties required to meet environmental, social or governance (ESG) standards. Between 2014 and 2019, the bank financed and facilitated US$164 billion in environmental finance activity, exceeding our US$100 billion goal four years ahead of schedule 7 . A host of corporates, including Maersk, Nestle and BP are transforming their operations, committing to have net zero emissions by 2050. Benefits for strong, ESG-driven companies include top-line growth (fuelled by consumer preferences) and reduced production costs (through efficiencies in energy and raw material consumption). Analysis by Citi shows that corporates with a high ESG rating outperform their contemporaries by 7% on a shareholder return basis 8 . And in 2019 Fitch announced that 22% of its corporate credit ratings were being influenced by ESG factors 9 . Certainly, sustainability has become a significant factor in trade – and will remain so, with the disruption likely to accelerate rather than delay that trajectory. Indeed, the pandemic is reaffirming its importance, not least in raising questions regarding how to optimise supply chains. For instance, COVID-19 has re-exposed the heavy reliance upon China’s manufacturing sector in global supply chains 10 . That said, some diversification away from China was already underway in many countries. A survey undertaken by McKinsey Global Institute in December 2019 reported that 70% of companies expected to change their globalisation and sourcing strategy, with 32% looking to move operations closer to end consumers 11 – a trend the pandemic is accelerating. While the industry comes together to find ways to support global trade during the pandemic and in its immediate aftermath, it is clear that once we emerge from all this the world of trade is likely to look very different. Not only will we see a re-evaluation of supply chains, the industry has been awakened to the true value of digitalisation. That long- promised move away from paper-based trade is now surely upon us. Yet future progress will be inspired by our actions today, which must be laser focused on the long-term despite the immediate needs of the crisis.