The Caribbean
The following research was prepared by our Toolkit contributor, Colin Bogle, to summarize the state of Sustainable Financing in the Latin American and Caribbean (LAC) region. His full research has been attached at the bottom of this page for your further reference. Please reach out to Colin to discuss his research further.
1. Definition – What is Green Finance
Broadly speaking, climate finance is the domain of financial entities seeking to fund adaptation or mitigation responses to climate change. Green banks are one such entity, differentiating themselves from typical banks with their dedication to facilitating private investment in environmental or “green” solutions to climate change. They are particularly in demand in regions that are especially vulnerable to climate change and require direct financial assistance.
2. Why do we need green banking?
Funding climate resilience is expensive. So expensive, that The United Nations Environment Program estimates that by the year 2030, roughly $300 billion will be needed annually by developing nations to help offset climate change (United Nations Environment Program, 2016). The purpose of climate finance on a whole is to fund these efforts, especially in regions of the world that need financial support to prepare for climate change.
3. Why does the Caribbean need green banking?
The developing world finds itself facing a climate catastrophe it is not responsible for nor equipped to manage. Green banks are one mechanism to shore up financial support for desperately needed mitigation and adaptation efforts. In the Caribbean, the risk of exacerbating issues such as poverty and governmental instability is particularly damaging given the risk the battering the region has received due to the Covid-19 pandemic, which decreased tourism, increased unemployment, and overall led to a decrease in economic growth (Caribbean Association of Banks, 2020). Going forward, if the Caribbean is to weather climate change-related crises, it will require a reliable financing mechanism specifically tailored towards the region.
4. The state of green banking in the Caribbean
According to a 2019 report from the Climate Bonds Initiative, the Latin America and Caribbean (LAC) region is slowly, but surely, developing a green financial market. Although only 9 of the 33 nations of the region offer green bonds, their issuance increased markedly in 2019 and stands to increase further. This growth is driven primarily by the need for green infrastructural development in the region (Climate Bonds Initiative, 2019). The pledges of various nations to reduce or halt their greenhouse gas emissions, combined with the passing of various climate policies, have acted as a market signal to encourage further development.
5. Examples of climate financing efforts in the LAC
Green Bond Transparency Platform - This is a digital tool designed to facilitate greater transparency in the Latin American and Caribbean (LAC) green bond market.
Listing of a Caribbean-based green bond on the Jamaica Stock Exchange
Green Finance LAC Platform - This platform promotes knowledge exchange on green financing throughout the region. It also offers technical assistance to regional governments.
6. Barriers to entry: What’s preventing green financing in the LAC?
The following are some identified barriers to entry:
A lack of regional financial integration
Overcoming cultural and linguistic barriers between countries
The relatively poor state of Caribbean financial development
Overreliance on tourism, agriculture, and extractive industries discourages change
For more information on this topic and to credit Colin Bogle's research please contact him on LinkedIn or by email - colin_bogle@yahoo.com
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