As environmental, social, and governance (ESG) issues become more important in investment and policy choices, the global regulatory environment for sustainability is both expanding and transforming. This chapter of our guide looks at what these trends mean for trade finance institutions. We also consider harmonisation efforts like the ISSB, TNFD, and GRI and give a summary of regulatory changes that will happen by 2025 on each continent.

In short:

• ISSB refers to the International Sustainability Standards Board, which develops global sustainability disclosure standards for financial markets.
  
• TNFD refers to the Taskforce on Nature-related Financial Disclosures, which provides a framework for organisations to report and act on nature-related risks and opportunities.
  
• GRI refers to the Global Reporting Initiative, an international organisation that provides widely used standards for sustainability reporting.

The ISSB was set up by the FRS Foundation to set a global standard for sustainability disclosures. IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-related disclosures) went into effect in January 2024. Adoption is picking up speed in Asia, Europe, and Oceania. According to the IFRS Foundation (2025), more than 30 countries have said they want to implement or align with the ISSB standards.

The TNFD announced its last set of recommendations in September 2023. These suggestions help people find and deal with risks and dependencies that have to do with nature. The highest adoption rates are in Europe, Australia, and some parts of Asia. TNFD says that more than 250 firms will have started testing its architecture by 2025.

GRI remains the most popular voluntary standard for sustainability reporting, especially among small and medium-sized businesses and organisations in developing markets. It is typically used with financial-materiality-focused standards like the ISSB’s IFRS S1 and S2, and stresses the need to be open with stakeholders and the consequences of decisions.

The Middle East

Several governments in the Gulf Cooperation Council (GCC) have established sustainable financing frameworks to serve as regulatory underpinnings for green finance policies. These encompass the UAE’s Sustainable Finance Framework (2021–2031), Oman’s Sustainable Finance Framework (2024), and Saudi Arabia’s Green Financing Framework (2024). Such policy frameworks are significant as they underpin GCC nations’ climate objectives and reflect governmental commitment to decarbonising their financial systems.

GCC nations demonstrably care about financing the energy transition; Oman and Saudi Arabia are targeting 30% and 50% renewable energy, respectively, by 2030. Islamic finance plays a role in this transition. Since 2017, economic diversification has transformed green finance instruments, particularly sustainable loans and sukuk (Islamic law-compliant debt instruments), into standard approaches for governments, banks and corporations. The growth in sustainability sukuk continued throughout 2024 despite declining ESG bonds.

Nonetheless, based on an EY survey of 20 major banks in the Middle East and North Africa (MENA) region, whilst 70% have published ESG strategies, implementation remains patchy with significant gaps in governance structures and risk management frameworks. Only 45% have established sustainable finance frameworks, and most banks lack proper climate risk policies, with over 80% having no climate risk commitments despite the region’s high vulnerability to climate change. Although banks are making operational improvements to reduce their environmental footprints, few are measuring their financed emissions or setting net-zero targets, indicating substantial room for improvement in aligning with global ESG expectations.

Africa

Africa’s rules for sustainability are in their nascent stages and getting stronger thanks to regional and continental frameworks. The African Union’s Agenda 2063 puts climate action and development that includes everyone at the top of its list of goals. However, ESG rules at the national level are, as of now, not very well defined. The Johannesburg Stock Exchange (JSE) and the King IV Code of Corporate Governance, which follow GRI criteria, require companies in South Africa to be open about their sustainability practices. The Securities and Exchange Commission of Nigeria has also given publicly listed firms advice on how to report on sustainability.

According to the United Nations Economic Commission of Africa (UNECA), African nations still have trouble getting climate money and attracting investment. They need to help nations build their ability to create and carry out coherent, climate-responsive financial plans. African countries have a hard time getting climate finance because they are underfunded, have a lot of debt, don’t have the skills they need, investors are afraid of risk, they rely too much on loans, there are global systemic biases, and their own priorities are changing. It’s a positive sign that UNECA is now focusing on pilot projects in Comoros and Cabo Verde, with the help of new finance mechanisms. But to make these methods work throughout the whole continent, there will need to be more international cooperation, changes to finance systems, and better planning and technical skills at home.

Most African authorities are slowly starting to use global standards like ISSB’s IFRS S1 and S2, as well as voluntary frameworks like the GRI. Kenya has started to use TNFD-aligned frameworks to look at biodiversity and nature-related risks. Rwanda’s 2024 investment plan under the Nature and Climate Investment Platform includes biodiversity certifications and measures to protect natural capital, which shows that they are following TNFD principles. This rising convergence shows that Africa is moving toward more responsible, resilient, and investment-friendly economic governance, based on internationally accepted principles for sustainability and risk disclosure.

Trade financing institutions have a hard time because of the different ways that countries on the continent disclose information. Still, there are chances in green trade financing, especially in the areas of renewable energy and agriculture, being harnessed by the likes of the African Export-Import Bank (Afreximbank).

Asia

In Asia, rules and regulations are an amalgam of new ones (such as in Indonesia and India) and old ones (like in Singapore and Japan). China’s Green Bond Endorsed Project Catalogue and its ESG disclosure standards, which have been required for publicly listed enterprises in key industries since 2023, are big steps forward.

Since FY 2022–23, the Securities and Exchange Board of India (SEBI) has made business responsibility and sustainability reporting (BRSR) mandatory for the top 1,000 listed businesses in India. 

The third version of the ASEAN Taxonomy for Sustainable Finance was published in late 2024 and took effect in December 2024. The goal of a single, region-wide framework is accurate, and it is designed to be interoperable with the national taxonomies of member states like Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Japan and Singapore were the first countries to ensure that their laws follow the ISSB criteria. In late 2024, Singapore became a regional hub for sustainability reporting after adopting ISSB’s IFRS S1 and S2. The Asian Development Bank (ADB) helps make sure that the TNFD and GRI frameworks are used in the same way by offering programs to enhance capacity.

The Sustainability Standards Board of Japan (SBBJ) officially linked its new sustainability standards with ISSB’s IFRS S1 and S2 in March 2025. The goal was to encourage Japanese Prime Market issuers to voluntarily adopt them starting in April 2025 and to make them mandatory in the future. In late 2024, Singapore’s authorities (MAS/ACRA) proactively accepted IFRS S1 and S2. They did this by creating a handbook and training programs, making Singapore a regional hub for sustainable reporting. The Trade and Supply Chain Finance Program (TSCFP) from ADB has added ESG due diligence to partner banks in countries like Bangladesh (for example, ESG workshops in Dhaka) and other countries in the region, including environmental and social management systems (ESMSs), better screening (for subjects such as child and forced labour), and the Green Equipment Facility to support companies in upgrading their equipment in reducing their carbon footprint.

Sustainable bond insurance and ESG fund AUM by region. Source: ESG Today, ISS Governance, ALFI, Harvard Law School Forum on Corporate Governance, IEEFA

Europe

The European Union (EU) Green Deal is the primary reason why Europe is still at the forefront of sustainability policy. The Corporate Sustainability Reporting Directive (CSRD) declares that companies must use the European Sustainability Reporting Standards (ESRS) when they provide information about their sustainability. These guidelines have been in effect since the beginning of 2024 (in force since 2023, effective for reports published from 2025). The EU The European Union (EU) Green Deal is the primary reason why Europe is still at the forefront of sustainability policy. The Corporate Sustainability Reporting Directive (CSRD) declares that companies must use the European Sustainability Reporting Standards (ESRS) when they provide information about their sustainability. These guidelines have been in effect since the beginning of 2024 (in force since 2023, effective for reports published from 2025). The EU Taxonomy Regulation is a set of rules that tells investors which economic activities are beneficial for the environment and which ones aren’t. This helps the EU reach its climate and environmental goals while making it clearer what kinds of economic activity are good for the environment.

After the UK left the EU during Brexit, it has shown signs of regulatory divergence. The UK has declared climate reporting in accordance with the TCFD rules mandatory, and it is working on creating UK Sustainability Disclosure requirements based on ISSB requirements. Such requirements should be in place by 2025. The UK government and the Financial Conduct Authority are working together to lead the development.

EFRAG, which describes itself as ‘Europe’s voice in corporate reporting’, has worked closely with the ISSB to ensure that ESRS and ISSB standards can work together. Many European firms are choosing to use the TNFD framework, which is becoming increasingly popular in industries which rely heavily on biodiversity, such as agriculture and fashion. It works well with the GRI Standards.

It is true that European trade financing institutions, both public (such as the European Investment Bank (EIB) and the European Bank of Reconstruction and Development (EBRD)) and private, have to follow more ESG rules. 

• The EU Taxonomy Regulation is the cornerstone classification system for environmentally sustainable economic activities.
• The Sustainable Finance Disclosure Regulation (SFDR) requires financial market participants to disclose sustainability risks and impacts in their investment decisions.
• The Corporate Sustainability Reporting Directive (CSRD) expands the scope and depth of sustainability reporting requirements for companies operating in the EU.
• The Benchmark Regulation (BMR) includes climate benchmarks and ESG disclosures for benchmark administrators.

These rules are affecting how banks and other financial institutions assess, report on, and align their actions with sustainability goals, including in trade financing. Both the EIB and the EBRD are working hard to make sure that their lending activities are in line with the EU Taxonomy.

• The EIB announced that half of its loans will promote climate action and environmental sustainability, and it is pushing for investments that are in line with these specifications.
• The EBRD is increasingly using taxonomy and ESG standards in its initiatives, notably in green finance and building infrastructure that lasts.

Costs for complying with ESG reporting, supply chain due diligence, and taxonomy alignment are going to increase, and small and medium-sized businesses (SMEs) are facing a greater challenge than larger companies because they lack as many internal resources, do not have as much technical knowledge, and are having trouble getting thorough ESG data. Nevertheless, multiple support systems, such as technical help and green assurances, are being put in place to make this easier, mostly through EU projects.

There has been a big increase in ESG-linked trade credit insurance, including price breaks for exporters and importers who are environmentally friendly. Additionally, there have also been new sustainable trade finance tools, like sustainability-linked guarantees and sustainable supply chain finance programs. These tools are meant to encourage beneficial ethical business practices, yet they fail to get rid of the rising cost of complying with ESG rules, which is still a big problem for many companies.

ESG fund AUM by region (2024). Source: UNCTAD

North America

The US shows a broken approach. The US Securities and Exchange Commission (SEC) finalised its rule on climate-related disclosure in March 2024. It says that big public businesses must report their Scope 1 and 2 greenhouse gas emissions, emissions from sources owned or controlled by the organisation, and emissions from energy the organisation buys and uses, respectively. 

But Scope 3 emissions were not required, perhaps since these emissions are extremely complicated to report on. Consider a bank providing trade finance to a client exporting commodities from Nigeria to Germany: Scope 3 emissions include maritime shipping or air freight emissions from transport, port handling and warehousing emissions, and emissions from suppliers involved in manufacturing.

Having said this, complexity is no longer an excuse when considering that rules are not applied across all 50 states. California, for instance, has passed stricter climate disclosure legislation, SB-253 and SB-261, which require significant corporations doing business in the state to publish their Scope 3 emissions and climate risks.

Canada is moving toward more consistent rules in sustainable finance. The federal sustainable finance action plan has a national green bond structure and a transition taxonomy to help major industries cut their carbon emissions. The Canadian Securities Administrators (CSA) have also backed ISSB-aligned reporting, which shows that there is a move toward having the same criteria for sustainable disclosure.

Many big US companies voluntarily disclose their sustainability efforts using frameworks like the GRI and the ISSB. However, the US has been sluggish to implement these standards at a legislative level. On the other hand, Canada is progressively moving toward complete ISSB alignment, and regulatory talks are already underway. The country is also actively engaged with both the GRI and TNFD, especially in the energy, mining, and forestry sectors, where nature-related disclosures are becoming more and more important.

In the US, trade financing companies face uncertainty as a result of inconsistent ESG rules. While bigger organisations develop their own internal frameworks, the absence of common standards makes it harder to conduct a uniform ESG risk assessment. On the other hand, Canada is becoming a leader in sustainable trade financing. Export Development Canada, for instance, offers green trade credit lines and ESG-linked guarantees to help the country move toward a low-carbon economy.

Latin America

Several Latin American nations have introduced regulations to strengthen ESG disclosure, especially in the banking industry. In Chile,  pension funds and big enterprises are required to conduct climate risk assessments, while Brazil’s Securities and Exchange Commission (CVM) has made it mandatory for listed companies to include ESG information in their annual reports. The Inter-American Development Bank is providing technical help to Colombia and Mexico as they develop ecological taxonomies.

As Latin America progresses toward more consistency, the GRI is still the most popular standard for sustainability reporting in the area. By 2026, both Brazil and Chile have promised to follow ISSB criteria for public enterprises. The Latin American Sustainable Finance Task Force is an example of regional cooperation that aims to help countries follow global disclosure standards.

Development banks like CAF and BNDES are issuing green and social bonds to help businesses in Latin America that are in line with ESG. But SMEs still have trouble getting ESG-linked trade finance, primarily due to limited data availability and difficulties in meeting reporting requirements.

Oceania

Australia and New Zealand are now the leaders in climate disclosure rules in Oceania. The Australian Treasury is putting the finishing touches on a required reporting system that follows ISSB requirements. It will start being used in July 2025. New Zealand has compelled big financial institutions to provide TCFD-aligned climate disclosures from 2023. This makes it one of the first countries in the world to do so by law.

Both nations are strongly behind the TNFD effort and are committed to using the ISSB’s S1 and S2 standards. The Australian government also uses GRI indicators in projects it pays for, especially in the natural resource industry. 

Export Finance Australia (EFA), which oversees the country’s trade finance, has incorporated included  ESG criteria in its lending approach. The agency places particular emphasis on green hydrogen projects and renewable energy exports. EFA currently uses ISSB-compliant frameworks to look at trade loan applications for climate risk, which shows its commitment to sustainable financing.

Consequences for trade finance institutions

There is a growing expectation that trade finance institutions will assess ESG risks in transactions, especially in industries with an adverse environmental impact. In the EU and Asia, lenders must either establish that their investments belong in a given category or explain why they don’t.

Despite efforts to unify standards, many organisations continue to face challenges. One key issue is bridging the gap between financial materiality, as emphasised by the ISSB, and impact materiality, central to the GRI—particularly in cross-border deals, where regulatory expectations can diverge.

From sustainability-linked guarantees and supply chain finance to green trade loans, sustainable trade finance instruments are gaining traction. Banks that offer a full range of sustainable trade finance include Standard Chartered, BNP Paribas, and HSBC.

Climate and environmental issues are increasingly being integrated into credit risk models. Riding on the momentum created by the TNFD, companies are spending money on AI tools, satellite monitoring, and ESG data platforms to aid with evaluations of natural impacts.

Smaller enterprises, particularly those located in Africa and Latin America, often struggle to meet complicated disclosure requirements. In response, more trade finance facilitators are offering technical assistance and simplified reporting pathways to help these firms participate in sustainable finance initiatives.

While ESG regulations continue to evolve all across the world, and fast, progress remains uneven. Europe makes the rules, as it were, but Asia and Oceania are advancing quickly with coordinated regional efforts, and while Africa and Latin America are improving, they still lack sufficient resources. The ISSB, TNFD, and GRI are collaborating to enhance alignment, interoperability, and interdependence; however, complete convergence remains an ongoing process.

Sustainable finance growth outlook by region (to 2030). Source : Grand View Research, National Law Review, Harvard Advanced Leadership Initiative, Thomson Reuters, IMF, Cleary Gottlieb