Advancements in Biodiversity Financing in Colombia
Colombia is enhancing biodiversity finance, focusing on regulatory frameworks and innovative financial instruments, such as biodiversity bonds, to support environmental sustainability. BBVA Colombia issued the first biodiversity bond, followed by Banco Davivienda, promoting sustainable projects amid decreasing wildlife populations in Latin America. The World Bank Group offers advisory support to foster a sustainable finance economy in Colombia.
Colombia boasts an impressive diversity of ecosystems, ranking just behind Brazil regarding species richness. The country has been a frontrunner in climate finance but has primarily concentrated on emissions reduction through investments in alternative energy and sustainable transport. Recent efforts have expanded into biodiversity finance, a sector requiring greater technical expertise.
To enhance biodiversity funding, Colombian regulators are implementing new rules and frameworks while major banks, such as BBVA Colombia, have issued the first-ever biodiversity bond, with Banco Davivienda preparing a second. Both initiatives are supported by the World Bank Group’s programs like the Joint Capital Markets Program (J-CAP) and the Financial Institutions Group of the International Finance Corporation (IFC).
The bonds raised funds intended for sustainable agriculture and forest regeneration. While these areas may not directly affect carbon reduction, they aim to protect diverse species and habitats. The Colombian Financial Superintendency (SFC) consulted international standards to design a blend of policies that promote biodiversity finance with the support of WBG entities like J-CAP.
Carlos Senon Benito, the Financial Sector Specialist at the World Bank, emphasized the importance of developing a biodiversity finance taxonomy to align private banks’ operations with environmental goals. This taxonomy facilitates the issuance of biodiversity bonds, marking a critical advancement in Colombia’s approach to climate finance.
Angela Maria Angulo Daza, Senior Adviser to the SFC, highlighted that expanding Colombia’s green taxonomy involved a scientific approach, integrating biodiversity objectives. The loss of biodiversity, spurred by climate change and urbanization, poses grave challenges to Latin America’s ecosystem, with wildlife populations plummeting.
Investing in biodiversity is essential for sustaining economic growth, argued Irina Likhachova from the IFC. She likened neglecting nature to depleting a warehouse without replenishing supplies, thereby necessitating investment in regenerative practices.
The J-CAP initiative has provided crucial advisory support for establishing metrics to evaluate environmental impacts linked to financial risks. This guidance led to BBVA’s issuance of a $70 million biodiversity bond designated for various environmental projects. A subsequent biodiversity bond of 50 million Colombian pesos is being planned by Banco Davivienda, aimed at funding mangrove restoration and assisting small farm exporters with environmental certifications.
Alejandra Diaz Agudelo, Director of Sustainability at Banco Davivienda, noted that the initiatives contributed to business sustainability by fostering a cooperative relationship with nature. The IFC is slated to be the sole purchaser of this bond, which aims to establish confidence in local-currency bond markets for future biodiversity financing opportunities.
In conclusion, Colombia is taking significant strides in integrating biodiversity finance into its climate initiatives. By establishing suitable frameworks and issuing innovative financial instruments such as biodiversity bonds, the country is addressing environmental challenges while promoting economic sustainability. Support from the World Bank Group and international expertise is pivotal in developing regulations that can preserve Colombia’s rich biodiversity and support sustainable practices within the economy.
Original Source: www.ifc.org
