Which countries in Latin America & the Caribbean are leading on sustainable banking, insurance and investment, and what are the main differences to consider across the region, in fostering growth in the sustainable finance community and advancing the agenda?
June 28, 2019- Buenos Aires, Argentina.
Two main countries are clearly leading in Latin America and the Caribbean: Brazil and Mexico. Brazil was the pioneer with the Bovespa Sustainability Index launched in 2005. In latter years, Mexico has taken an active role with the appearance of the green bond instrument. Colombia, Chile, Costa Rica, Peru and Argentina are following in the green bond market. The main differences to my understanding in Latam are:
- In Brazil, sustainable finance, is being pushed forward by regional development bank (BNDES) and big corporations that are leading in the green bond market such as: Suzano Papel and Celulose and JBS. Insurance sector has also been very active in Brazil since 2009. Although Brazil used to hold a big promise for the sector, lately due to political problems this has been delayed. In all my past roles of Latin America manager, I have always considered Brazil separated from the rest. Brazil has a different culture and in my experience should be treated as a different chapter due to the fact that many actions that work on the rest of Latin America will not work well in Brazil.
- Mexico has been stepping forward as a leader in Latam with the work being developed by Grupo Mexicano de Valores (Stock Exchange) on sustainable finance. With financial support from the British embassy, this group has been doing an excellent job not only in Mexico but leading in other countries such as Peru, Chile, Colombia and Argentina co organizing and founding events in the region.
- Colombia plays an important role in sustainable finance. Colombia was the first country in Latin America to present a prefeasibility cost analysis of their NDC. Regarding climate change work, Colombia has been a leader in the region. This information helped them to start looking for financial instruments available. Banks such as Bancoldex and Bancomer are leading in green bond issuance. Bancoldex is in the brink to issue its first social bond after issuing green and sustainable bonds in the past.
- I would say Peru is surprising us lately with their interest in green bond issuances.
- In Chile, one of the main actors is the Santiago Stock Exchange. As exchange they are actively participating in the SSE (Sustainable Stock Exchanges) creating documents and producing information on climate/ sustainable finance.
- Argentina was the last country to come up with sustainable finance due to political issues. With the change in administration in December 2015, climate change and SDGs were again into the political agenda. The gap in terms of sustainable finance / climate change that the country has with respect to other regional countries is significant. Having said this, in the past 2 years we have observed the following: capital markets have move forward in the organization of events and bringing light on these issues. BICE bank (the closest to a development bank) and GALICIA bank had issue green bonds in 2018. ADEBA (Association of Arg. Banks) through its work with UNEP has also an important participation. G20 organization in 2018 helped a lot in bringing attention to climate/sustainable finance agenda.
- In general I would say that there is a big future for Latin America in green/ sustainable finance. Green Infrastructure, renewables, social appraisal are huge necessities in the area with a big potential of going green. It is clear that the surge of a financial instrument (green bond) has move forward within financial institutions the interest in sustainable finance.
- When participating in international events outside the region my perception is that Latin America, although running behind other regions is not that far away of the global leaders.
- With regard to how to advance the agenda in Latam I would say that partnerships are vital. (E.g.: in capital markets the partnership that the Mexican Stock Exchange has with the Buenos Aires Stock Exchange are the way to go forward). Also, interaction in regional federations is important. (E.g.: interaction happening in FIAB – Latin-American Federation of Stock exchanges- has been very useful in advancing on the sustainable finance agenda within capital markets). But the main way of advancing in this agenda is the creation of new financial instruments (E.g.: Green equity, FIBRAS such as in Mexico, etc). This would allow the financial institutions to invest and participate in the sector. To make sustainable finance get out of the marketing departments of financial institutions we need to create financial instruments that will have to be foster and embedded in their financial departments. “Lions are carnivore not vegans”