Citi Launches Sustainability-Linked Supply Chain Finance
(18 November 2021 – Asia Pacific) Citi has launched a Sustainability-linked Supply Chain Finance (SSCF) program that links working capital finance to sustainability goals within supply chains.
The program is a first for Asia Pacific customers, said Scott Southall, treasury and trade solutions country head for Citi ANZ.
"Citi, in conjunction with our clients, are using a leading sustainability assessment agency to assess corporate suppliers and, depending on their rating, our clients can offer a more preferential funding rate to suppliers," Southall said. "The Sustainability-linked Supply Chain Finance solution creates an economic incentive to help companies in aligning suppliers with their sustainability agenda. For us it is really exciting, because it really opens up a whole new avenue for corporates working to advance this through their ecosystem."
The service will allow corporate clients to offer finance, in the form receivables discounting, at better interest rates to their suppliers that perform well on various E, S and G metrics - or as an incentive to improve ESG performance. Citi uses EchoVadis to assess supplier companies against a broad range of ESG criteria to obtain an overall rating, Southall said.
Citi's first SSCF program has been implemented for German chemical and consumer goods company, Henkel. The program was first launched with suppliers in Australia and will be expanded to include suppliers in additional markets over the coming weeks.
The program is also a first for Henkel in Asia Pacific and is targeted at existing or new suppliers who demonstrate strong or improving sustainability performance. Qualifying suppliers can access Citi's supply chain financing at preferential rates on a tiered basis with rates improving as a supplier's sustainability score improves.
"We are convinced that sustainability-linked supply chain financing can help improve sustainability across Henkel's large supplier ecosystem in Asia Pacific," said Christoph Wenner, Henkel regional head of finance, Asia Pacific. "This program demonstrates Henkel's commitment to creating a virtuous cycle of economic, environmental and social value."
The SSCF program is part of a broader move to develop institutional finance products that link in sustainability.