Green finance is a way to support sustainable development, encourage investment decisions and develop projects that seek to generate a positive impact from the financial trenches.
Every year there is a growing emphasis on environmental awareness and the urgent need for sustainable development for all. Green finance – the integration of environmental, social and governance (ESG) factors into financial decision-making and using the UN Sustainable Development Goals as a compass – is becoming a powerful tool to foster both economic growth and environmental preservation. In recent years it has gained significant traction as countries around the world strive to address pressing environmental challenges while fostering economic growth. Latin America, increasingly aware of environmental issues and their consequences, has been increasingly recognizing the importance of green finance as a powerful tool for achieving sustainable development.
There are programs initiated by private institutions, NGOs and multilaterals that seek to promote sustainable financing. These initiatives should not only come from the private sector, but also require government intervention, from the issuance of regulations to its active participation in green financing. Latin American governments have joined this trend by issuing green bonds for the development of sustainable projects for their countries. Even now, we see blue bonds that promote ocean conservation.
IDB Invest and Bolivia have announced the first blue bond that has as its main purpose the conservation of the oceans through the promotion and expansion of access to credit for sustainable seafood production, water management, wastewater, and solid waste management and circular economy.
Among the sectors that benefited most from green financing were:
- Renewable energy.
- Energy efficiency.
- Sustainable transportation.
- Waste management.
- Sustainable agriculture.
- Nature conservation.
The development of these projects has been made possible thanks to banks that provide financing with these objectives (and that have adapted their policies to support these initiatives) and investment funds that focus on investing in areas whose indicators are aligned with protecting the environment and have practices that minimize their negative impact.
One of the most significant trends in the region is the growing focus on investments in renewable energy, such as wind, solar and hydroelectric power.
These projects not only contribute to reducing greenhouse gas emissions, but also help Latin America continue to recognize the need to invest in sustainable infrastructure to promote urban development and minimize environmental impacts.
Regulatory frameworks are evolving to promote greater transparency and accountability in the green finance sector. Regulatory development is critical for green finance to be encouraged and to raise awareness of the importance of making finance go hand in hand with financial and social well-being.
This transformation to green finance depends on the establishment of sound regulatory and institutional frameworks, along with the implementation of transparent and accountable mechanisms. These innovative financial mechanisms range from renewable energy infrastructure, environmental and ocean protection to sustainable urban development. Green finance can be aimed not only at meeting indicators or meeting a number, but also at raising awareness among stakeholders about the impacts of our actions and that sustainable development is necessary to sustain our planet.
Total Latin American and Caribbean (LAC) international bond issuance in 2022 was US$64 billion. (https://www.cepal.org/es/noticias/2022-monto-emisiones-bonos-america-latina-caribe-fue-valor-anual-deuda-internacional-mas)