Building a Greener Latin America

Far from being among the top greenhouse gas emitters today, there are many reasons why Latin America and the Caribbean needs to be at the center of the actions to combat climate change and global warming. While the region is home to half of the planet’s biodiversity and to 57% of all remaining primary forests, it is undoubtedly one of the most challenged by current and future climate risks ─ with shifting precipitation patterns, melting of Andean glaciers, and the rise in sea and acidic levels in the Pacific and the Atlantic oceans, among a long list of events.

These effects will have direct consequences on regional economies that even before the pandemic were already showing a slowdown, and that after Covid-19 will be weaker, poorer, and more indebted. Faced with this reality, the commitment to green growth appears as the safest and most sensible bet for the well-being of Latin Americans.

We need to hop onto the inevitable transition to cleaner economies that the world is experiencing and will continue to deepen in the coming decades. In Latin America, this has to be done by accelerating energy transition, strengthening reforestation and forest recovery, and supporting industries with better financial conditions to reduce their carbon footprint. These efforts need to consider technology as a key instrument in the protection of the region’s natural resources and ecosystems.

Green growth financial needs are overwhelming, but some mechanisms can bring us closer to them.  Globally, we need to double investments in energy projects - up to 5 trillion dollars by 2030 - to meet the challenge of being carbon neutral by 2050, according to the International Energy Agency. In parallel, according to UNEP, until 2050 we need to invest 8.1 trillion dollars to protect natural ecosystems and biodiversity.

In 2019, green financing in Latin America reached almost 8 billion dollars, but the gap of finance needed for adaptation to climate change was 110 billion. The region continues to depend heavily on fossil fuels, while maintaining  production and services systems with low levels of modernization and intensive in the use of natural resources.

It is essential to adopt new financial instruments that allow to optimize the use of capital, as well as to strengthen current sources of green financing in capital markets. In this sense, multilateral banks will play an important role in catalyzing additional investments and offering investors the security they often need to make large disbursements. The green growth road also involves connecting with local actors, such as national development banks and commercial banks.

Despite the magnitude of the challenges presented, Latin America and the Caribbean has the potential to redirect its course. From CAF -Development Bank of Latin America- we put forward an agenda to become the green bank of Latin America. This green agenda is based on aligning economic sectors to draw guidelines that redirect their planning framework towards social responsibility, environmental sustainability, and a development approach that is low in greenhouse gas emissions and is climate change-resilient.

Under this approach, we seek to generate a competitive financial offer as well as technical solutions that will allow Latin America to become a prominent player in global climate action. This can be achieved through the mobilization of resources to finance environmental, forestry, water, climate, waste management, energy efficiency, and sustainable agriculture projects. Our commitment will be reflected in our yearly approval of green financing operations projections, from 26% in 2020 to the estimated 40% in 2026.

We want to help Latin America and the Caribbean to become one of the most emphatic emerging regions in global geopolitics, especially concerning climate action. That is why we must strive to preserve ecosystems as valuable to the planet as the Amazon -one of the lungs of the world - a  vast region that is shared by Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru, Suriname, and Venezuela.

During these times of pandemic, we have witnessed the role international agencies and multilateral institutions can play to help overcome a crisis by fulfilling financing needs and coordinating different actors’ efforts. Over the next decades, we need to promote cooperation across the public and private sectors to strengthen climate action, sustainable development, knowledge sharing, and a better balance with nature. That is the case of initiatives such as the Leticia Pact, which bring great value to promoting the Amazon’s conservation.

We live in a world where there is a deep disconnection between human activities and our planet's ability to absorb our way of living. It is urgent to consolidate a regional governance that allows opening the green path of growth. In Latin America and the Caribbean, recovery and growth must necessarily be green, digital, and people-centered.