Sustainable finance, in its simplest definition, is a set of financial regulations, codes, bills, taxonomies, standards, norms, and products intended to accelerate and scale up the transition from carbon-intensive products, services, and activities to greener ones. For many years, the lack of definition behind green and environmentally friendly products triggered greenwashing practices. Regulators, pushed by society and governments around the world, started to enact regulations in the form of green or sustainable taxonomies that serve as frameworks to classify and compare green, social, and environmental indicators for investors and companies. The main target users for green taxonomies are banks, institutional investors, project developers, and investment funds. And currently, more than 15 countries (and the EU block) have published such instruments or are in the process of.
Even though there are implementation and data-collection challenges related to these taxonomies, there are multiple benefits and opportunities that Latin American and Caribbean nations could reap from putting them in place, including:
- Enhanced creditworthiness;
- Greening of the financial system;
- More investment opportunities and access to international climate funds;
- Catalyzing public-private partnerships to unlock resources.
Don’t miss this short brief to read more!