CAF to allocate USD 40 billion over the next five years to boost green growth

CAF -development bank of Latin America and the Caribbean- announced an investment of US$40 billion over the next five years to finance sustainable growth and promote climate action, with an emphasis on just energy transition, water security, sustainable mobility, agricultural prosperity and conservation of key strategic ecosystems for the planet, such as the Amazon, Patagonia, moorlands and mangroves.

With these financial resources, CAF will consolidate a portfolio of operations that combines project financing, promotion of sustainable public policies, impact investments, green credit lines to financial institutions, use of innovative instruments (such as debt-for-nature swaps or sustainability-linked loans), and work with subnational governments to ensure that financing reaches all citizens.

"This is an unprecedented investment by a development bank in Latin America and the Caribbean, demonstrating our commitment to a more sustainable, more equitable and more prosperous region," said Sergio Diaz-Granados, CAF's executive president. "In 2021, we set a goal to become the green bank in Latin America and the Caribbean, and projected that at least 40% of approvals would be green by 2026. We have already met this goal by 2024. With today's announcement, we will be increasing our green financing to 50% by 2030."

CAF's announcement coincides with the CELAC-EU Summit in Santa Marta, which should deepen European cooperation and investment in the region. EU-CELAC relations have the potential to boost sustainable development in both regions, with millions in investment opportunities committed to the Global Gateway initiative. Latin America and the Caribbean, which is home to 60% of the world's biodiversity and generates 30% of its energy from renewable sources, is a key partner for the EU in the green transition.

Strategic lines of action for the Latin American and Caribbean green bank

The funds will be allocated to the following areas of action:

• Just Energy Transition. Latin America and the Caribbean has great potential in renewable energies such as solar, wind, natural gas, hydro and geothermal. To promote a just energy transition, this approach seeks to decarbonize the electricity, transportation and productive sectors, and also to ensure energy security, affordability of service to improve the welfare of communities. CAF will allocate USD 10 billion in approvals by 2030 to drive a just energy transition.
• Resilience, strategic ecosystems and the agricultural sector. In the face of threats from deforestation, mining, intensive agriculture and climate change, CAF will promote adaptation, climate resilience and an ecosystem approach. The strategy values the wealth of terrestrial and marine-coastal ecosystems, through interventions for the conservation and sustainable use of biodiversity, blue economy, disaster risk management, while enhancing the opportunities of the agricultural sector in a regenerative and sustainable manner.
• Resilient territories. CAF's actions aim to promote water security through access to drinking water, sanitation and drought and flood management. At the same time, it seeks to develop sustainable urban and mobility systems, as well as to strengthen creative economies and tourism, promoting a model of urban regeneration and infrastructure development that is in harmony with nature.
• Physical and digital infrastructure. To close the infrastructure gap, which requires an annual investment of about 5% of the region's GDP, CAF promotes physical connectivity and digital transformation under a regional integration approach. This is materialized in sustainable infrastructure interventions in transportation, logistics and energy, along with digital transformation projects.

The institution also plans to mobilize third-party financing sources, such as the issuance of sustainable bonds and green and climate funds, and will promote partnerships between governments, civil society, international organizations, NGOs and the private sector. An essential component will be working with subnational governments and municipalities.

High-impact initiatives

CAF's green initiatives that are making an impact include the following:

• The USD 1 billiondebt-for-nature swap of the Lempa River in El Salvador showed that it is possible to create schemes where debt restructuring frees up fiscal resources that, in turn, are reinvested in the protection of critical ecosystems and the development of local communities.
• Biodiverciudades Network: The BiodiverCities Network is a space for the articulation of local governments that identifies, structures and finances sustainable urban interventions of quality and high impact, based on people and biodiversity.
• Conservation, restoration and sustainable use of strategic ecosystems: will increase direct financing for biodiversity in both the public and private sectors in 15 strategic ecosystems throughout the region, enhancing the value of the services that ecosystems provide to people, especially those in the most vulnerable situations.
• Bono Azul, with technical support from UNDP, CAF issued its first blue bond for EUR 100 million to finance projects for the protection of the ocean and coastal communities.
• Green SMEs: is an initiative co-financed by the Green Climate Fund (GCF) and CAF that provides loans and technical assistance to small and medium-sized enterprises (SMEs) through local financial institutions in Chile, Peru, Ecuador and Panama, aimed at mitigating climate change through innovative solutions in renewable energy, energy efficiency and land use.