KEPSA participated in the Inaugural Trade Day, focusing on the integration of trade into the climate, a side event that took place on December 4, 2023, at the Trade House Pavilion, on the margins of COP 28, taking place at the Expo City in Dubai. KEPSA was represented by Ms. Faith Ngige, Climate Business Information Network Kenya Coordinator. The session was moderated by Mr. Rami Rafih, Managing Director and Partner, BCG. The key speakers included Mr. Samaila Zubairu, CEO Africa Finance Corporation; Ms Farmida Bi, Chair, MENA Norton Rose Fulbright; Barry O. Byrne, CEO Global Commercial Banking, HSBC; Miho Shirotori, Head of Trading Systems Services and Creative Economy, UNCTAD; and Mr. John Denton, Secretary General, International Chamber of Commerce (ICC).

Ms. Shirotoni, UNCTAD, highlighted that global trade is important for sustainable economies since trade provides solutions for both adaptation and mitigation. No country is self-sufficient in terms of products and services, and cross-border trade plays a key role in ensuring people can afford and can access goods and services to meet their needs. Trade policy also plays a significant role in global supply chains, as it has a direct and immediate impact on the market, especially in terms of tariffs, levies, and related charges. The speed of trade policy can therefore exert influence on the market. Trade policy is key to accelerating climate action on the market. On the other hand, trade and supply chains also contribute to emissions, and therefore decarbonization measures should consider decarbonization of value chains as one of the key focus areas to reduce greenhouse gas emissions.

Mr. Zubairu, Africa Finance Corporation, indicated that energy transition for trade value chains, especially transport and distribution systems, is key to reducing emissions. There is a need to capitalize on local production in order to maximize low-value capture of emissions and realize optimum processing approaches. Greening of fuel use in the value chain and resource efficiency interventions are some of the measures that can be adopted to reduce carbon emissions in trade.

Mr. John Denton, ICC Secretary General, shared the challenges facing the private sector in trade and climate, which include the following: Different regimes adopted in different parts of the world in relation to carbon methodologies and standards have led to the complexity of the trading ecosystem. Different regions of the world interpret sustainability differently. Small players, including micro and small enterprises, have additional challenges of access to finance coupled with limited capability to implement these sustainability measures, which often come at a cost. Trading has a unique ecosystem of actors and players that has existed for a long time, and emerging issues need to find alignment with sustainable trading principles.

Ms. Farmida from Norton Rose Full Bright, emphasized that the diversity of trade and the actors is a challenge in creating uniform standards. Trade has taken place for hundreds of years, and disrupting the practice in light of sustainability is not easy. With the alignment comes the question of who meets the cost of compliance, associated sustainability certifications, accountability, and reporting measures calling for incentives through capital relief for this emerging trend. There is a need for reliable, consistent data to meet the disclosure requirements.

Mr. Barry, HSBC, indicated that around eighty percent of emissions in trading are linked to the supply chain. It is therefore important to ensure there are tools and approaches to support sustainable trading, such as nature-positive climate financing, guarantees, sustainable sourcing, sustainable working capital, etc. Nevertheless, access to climate-related trade finance faces a number of challenges; SMEs face a rejection rate of around 45%, and big corporations rejection rate is  30%. There is also a different perception of climate risk associated with trade finance among different institutions.

The session moderator, Mr. Rami, summarized the session as follows: Opportunities exist for leveraging guarantees and using credit enhancement measures for trading finance, for the integration of value chains to reduce shipping and transport emissions, for adopting local processing for shorter value chains, and for ensuring a just transition of decarbonization measures in trade. The session concluded by underscoring the need for alignment, adaptability, and inclusivity in the just transition of trade and supply chains for sustainable economies. Trade day saw the launch of the Sustainable Trading Principles by the International Chamber of Commerce.