Panama, 07 June 2022 – The activities of the Working Group on Sustainable Finance Taxonomies in Latin America and the Caribbean (GTT- LAC) to develop a common framework of sustainable finance taxonomies for the region were officially launched by His Excellency Franz Tattenbach, Minister of Environment and Energy of Costa Rica and Chair of the Forum of Ministers of Environment of Latin America and the Caribbean (the Forum).

“Let’s start speaking the same language when we refer to sustainable finance; let’s support policy makers, financial regulators and supervisors, banks, investors, as well as specialists from international organisations to understand and build a common language and a science-based definition of what sustainable finance is and what it is not,” stressed the Forum Chair.

Sustainable finance taxonomies are classification systems for environmentally sustainable activities that support the private sector, specifically financial and business actors, in determining which activities comply with this designation. Taxonomies can help in increasing preferential capital flows to sustainable projects that are key to decarbonize global economies. More and more countries, including LAC countries, have worked to structure and develop official definitions of sustainable finance focused primarily on the climate change goals set out in the Paris Agreement; hence, it is important to create a common framework that establishes principles and harmonizes criteria for the development of national or regional taxonomies.

“I applaud the initiative of the LAC Forum of Environment Ministers to work hand in hand with financial actors to support the identification of sustainable investment opportunities, fostering certainty, credibility, integrity and transparency to the market; and in turn, enabling the mobilization of capital aligned to each country’s environmental goals,” said Eric Usher, Global Director of the UNEP FI Initiative.

There are about ten taxonomies under implementation and more than fifteen in development worldwide. LAC has one taxonomy under implementation (Colombia’s Green Taxonomy, published in March 2022) and six taxonomies under development.

The creation of a common framework for taxonomies in the region would improve interoperability with other taxonomies globally; one example is the EU-China Common Framework, developed through the International Platform on Sustainable Finance (IPSF) to assess the similarities and differences in approaches of both taxonomies.

During the opening, Ma Jun, Chair, China Green Finance Committee, and Co-Chair of the Taxonomy Working Group of the  International Platform on Sustainable Finance (IPSF); and Raffaella Assetta, Head of Unit, Directorate-General for Financial Stability, Financial Services and Capital Markets (DG FISMA) of the European Commission; highlighted that “the development of the common ground taxonomy provides clarity and transparency about the commonalities and differences in the EU and China approaches, which is an important step towards ensuring comparability and interoperability of taxonomies across jurisdictions. “.

Mariana Escobar, Head of Climate Finance at the Superintendencia Financiera de Colombia, shared how was the process to create the Green Taxonomy in Colombia. “The voluntary involvement of the expert groups in both the construction and validation process was one of the main successes during the Taxonomy development process“, she emphasized.

Undoubtedly, participatory processes and collaborative work are at the core of the construction of the taxonomies. Olga Cantillo, General Manager of Stock Exchange and Secretary of the Sustainable Finance Working Group of Panama, stressed that the public-private dialogue roundtables are a key mechanism to drive the coordinated transition towards a low-emission and climate-resilient economy.

Another relevant example is the Chilean government’s Public-Private Roundtable on Green Finance that supported the elaboration of the Taxonomy Rodmap for Chile, which was presented by Joaquín Guajardo, Coordinator of the Roundtable and Advisor to the Ministry of Finance of the Government of Chile.

The region has reached a turning point in its environmental policy planning, with Ministries of Environment and Ministries of Finance working together to ensure an orderly transition to resilient, low-emission economies. LAC is facing an opportunity to build interoperable definitions of what constitutes sustainable investment and requires a participatory process. Therefore, the GTT-ALC calls to collaboratively build a common sustainable finance framework for the region that will help to speak the same language. This will enable aligned and well-ordered mobilization of capital towards meeting the national targets of the Paris Agreement and the 2030 Agenda.

The GTT-LAC is an initiative of the Interagency Technical Committee (ITC) of the Forum of Ministers of Environment of Latin America and the Caribbean, and is constituted by the United Nations Environment Program (UNEP), the Economic Commission for Latin America (ECLAC), the United Nations Development Program (UNDP), the World Bank Group, the Inter-American Bank of Development Bank (IADB), Development Bank of Latin America (CAF), and the Food and Agriculture Organization of the United Nations (FAO). The LAC Taxonomy Working Group is financially supported by the European Commission through the EUROCLIMA+ Programme.

Watch the launch of the Working Group on Sustainable Finance Taxonomies in Latin America and the Caribbean here.