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ESG and Climate Risks in Finance: Opportunities for the Public and Private Sectors
05/27/2022 Since 1 month

The authors of the IDB Invest blog maintain that the financial sector must identify opportunities to make its contribution to society and create strategies and business models that consider ESG risks, benefits and impact in the broadest sense. Throughout the article, the authors describe and analyze some examples of social and environmental aspects.

Within the actions related to the environmental “E” aspect of ESG, the authors mention that net zero emissions are an important way for banks to generate impact. For example, the Colombian bank Bancolombia has signed international agreements, disclosed its environmental risks and taken concrete actions to achieve net zero emissions.

In the social “S” aspect, they consider that one way to create positive impact is through the programs implemented by banks to support women-led businesses.  They highlight the examples of BHD León, a Dominican bank that has launched its Mujer Mujer program, and Banco de América Central (BAC), which has created its Mujer Acelera program.

The authors also highlight regulatory developments and cite as an example two IFRS/ISSB proposals that create a comprehensive baseline of sustainability disclosure for the entire world. One of these standards focuses on general sustainability reporting requirements, while the other focuses on requirements related to climate disclosures. Regulators in the LAC region are also working to consolidate specific public policies to make financial sectors more sustainable and greener. Examples include Colombia (green taxonomy), Chile (climate finance roadmap, ESG disclosure regulation), the issuance of blue bonds in the Caribbean, and regulations in Brazil, Honduras and Paraguay, many of which have been supported by the IDB.

IDB and IDB Invest, together with the Global Reporting Initiative (GRI), are working on a document with reporting guidelines for capital markets. Based on data from investors, issuers and regulators, the document analyzes the perceptions of these actors and includes analysis and recommendations on regulatory gaps for both the public and private sectors. Most financial institutions in the region are already acting proactively to create disclosures and take advantage of the significant opportunity presented by sustainability.

This post is also available in: Spanish Portuguese (Brazil)

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