Innovating to help trade commodity clients reduce their carbon emissions


Raw commodities are some of the most carbon-intensive products traded. Aware of the risks associated with their supply chain, sustainability-driven commodity merchants have already integrated ESG factors into their business strategies in order to reduce risks, improve financial returns and meet the expectations of their various stakeholders.

However, both commodity traders and banks financing their business often lack accurate data on supply chain emissions at asset level, whereas understanding the carbon emissions associated with each trade financed is an essential first step towards monitoring and reducing them.

To overcome this challenge and help their commodity trader clients take their responsible approach one step further, Societe Generale’s Trade & Sustainable Commodities Finance department in Switzerland has signed a partnership with CarbonChain, a leading climatetech providing software for commodity supply chain carbon accounting. Via CarbonChain’s platform, commodity merchant users are able to measure the CO2 emissions of each transaction in their end-to-end supply chain, from mine to final product. It provides emissions data and ratings of each transaction's carbon performance against industry benchmarks, extensive reports, and a rating of users’ supplier portfolio, enabling them to select those most aligned with their ESG ambitions.

As a result of this partnership, Societe Generale has onboarded two of its major metal trader clients – Concord Resources and IXM – as part of year-long pilot programmes. In practice, these programmes are based on the provision of sustainability-linked loans by the bank to its clients. These special trade finance terms are conditional on the achievement of ambitious, pre-defined emissions reduction targets by the commodity merchants over a 12-month period, against a previous year's baseline. To monitor and evaluate performances of the clients over time, key performance indicators (KPIs) based both on sustainability criteria assessed by independent reference organisations and on the rating-system derived from the CarbonChain database have been co-created. Throughout the year, clients can access CO2 emissions reports and progress-tracking dashboards for every transaction financed via the CarbonChain platform, as well as the other features previously mentioned. By regularly monitoring and controlling these climate-related KPIs, commodity traders are able to undertake the necessary initiatives to bring about positive change and achieve their sustainability goals.

This joint initiative between Societe Generale and CarbonChain demonstrates that by supporting their clients towards their decarbonisation journey, including through innovative partnerships with external companies, banks can proactively contribute to the energy transition and encourage the emergence of more sustainable models.

This is a major milestone in our clients’ climate journey providing a vital incentive for this global resources merchants to meet their respective sustainability objectives. Concord and IXM have been tracking and reporting their trade supply chain emissions via CarbonChain’s platform for more than two years now. Banks require increasing transparency and action in their carbon-intensive portfolios. They want to reward low-carbon trades and products, but they generally lack the carbon data to do so. This partnership is a key milestone for Societe Generale and the whole industry. Collaboration between traders, banks, suppliers, and producers is key to tackling carbon risk and getting ahead of regulation. Deia Markova, Head of the Trade & Sustainable Commodities Finance department at Societe Generale in Switzerland.

As one of the world's largest traders of physical non-ferrous metals, IXM is determined to play an active role in the global energy transition. Part of this essential mission lies in our ability to track CO2 emissions throughout our supply chain in order to reduce them, and to finance new projects in line with increasingly sustainable models. This is why IXM was keen to take part in this programme together with Societe Generale and CarbonChain, as it should help achieve this ambitious dual objective. Julien Chassaing, Head of Treasury & Financing IXM

Building transparency in commodity trading is a priority for Concord in the transition to a low-carbon economy. We aim to raise the bar for carbon emissions reporting by partnering with Societe Generale and CarbonChain. Mark Hansen CEO, Concord Resources Limited

We are proud to have facilitated these pioneering partnerships for the trade finance industry. Societe Generale and its participating clients are proving that transparency and data are the key to unlocking the financial incentives necessary for decarbonizing the economy. Accurate accounting of carbon emissions from source to shipment and beyond is the bedrock for any robust trade commodity finance sustainability-linked loan. Adam Hearne, CEO and Cofounder, CarbonChain