How do we know if an investment is “green”? This question, which seems simple, is not easy to answer and represents a fundamental discussion in the field of green finance. Taxonomies seek to answer this question, providing clarity and transparency to market participants, with a classification system as a reference to guide what is considered a green investment.
In the context of the Green Finance Roundtable launched in 2019 with the collaboration of the IDB and other partners, Chile has decided to start discussing the potential development of a taxonomy of activities. The Plan for a Taxonomy of Activities launched this month considers international experiences on the subject, analyses the benefits and costs of developing a taxonomy of activities for the country, and discusses in detail what could be the best options to develop it, balancing the adoption of international standards with the need to adapt them to the country’s context.
The IDB has been accompanying several countries in the region in the development of green finance and climate action in general. Likewise, we support Chile in the development of the Plan for a Taxonomy of Activities, which we are confident will continue to strengthen Chile’s leadership in climate action in the region.
The country has set a goal of achieving carbon neutrality by 2050 and increasing its resilience to climate change, has shown significant growth in the use of renewable energy, has committed to the scheduled phase-out of coal-fired power plants by 2040, and has presented a green hydrogen strategy, which aims to position the country as a global leader.
Along these lines, the Ministry of Finance and financial regulators have taken on a key role in facilitating the flow of public and private capital to meet climate commitments, which is reinforced by the launch of this Taxonomy of Activities Roadmap for Chile. Several initiatives have been carried out or are being promoted in the framework of green finance in Chile, under the leadership of the Ministry of Finance: (i) the co-chairing of the Finance Minister in the Coalition of Finance Ministers for Climate Action; (ii) the signing of a Green Agreement between the public and private sector, and the Joint Statement of Financial Authorities on Climate Change; (iii) the publication of the first financial strategy on climate change; and (iv) the first sovereign frameworks for the issuance of green bonds and sustainable bonds, among other milestones already achieved.
Financial regulators, in addition to actively participating in the Public-Private Roundtable on Green Finance, have also made significant progress in recent years. Chile’s Financial Market Commission (CMF) is working on different climate initiatives within its supervisory and regulatory role, which have been included in its Strategy to Confront Climate Change, which groups together the CMF’s objectives and work plan on climate issues.
The Plan for a Taxonomy of Activities will boost the momentum of green finance in the country, and can feed into the discussion on how to finance the measures needed to achieve Chile’s climate goals. At the IDB we are proud to continue accompanying the country in this process, which will be of great benefit to other countries in the region.
This post is also available in: Spanish