Colombia, possessing an extraordinary wealth of biodiversity, is enhancing its climate finance strategy to include biodiversity financing through innovative instruments like biodiversity bonds. Backed by the World Bank Group, efforts focus on creating regulatory frameworks, promoting sustainable projects, and raising awareness about the economic impacts of biodiversity loss. Recent bond issuances by BBVA Colombia and Banco Davivienda reflect a growing commitment to sustaining the country’s unique ecosystems.
Colombia is renowned for its rich biodiversity, hosting diverse ecosystems ranging from the Amazon to the Andes and coastal regions, only surpassed by Brazil in species count. Historically, Colombia has excelled in climate finance, primarily focusing on mitigating greenhouse gas emissions through investments in renewable energy and low-impact transport.
Recently, Colombia has widened its climate finance strategy to incorporate biodiversity, where government regulators are implementing new rules to enhance biodiversity finance. Notably, BBVA Colombia has launched the world’s inaugural biodiversity bond, while Banco Davivienda is preparing to issue another, reflecting a growing commitment to sustainable financing practices.
The transition to biodiversity financing has been supported by the World Bank Group’s Joint Capital Markets Program (J-CAP) and the International Finance Corporation (IFC). These programs have assisted in establishing a policy and regulatory framework that enables bond issuances, effectively mobilizing capital for projects in sustainable agriculture and habitat restoration, despite their indirect impact on carbon emissions.
Prior to issuing biodiversity bonds, the Colombian Financial Superintendency collaborated with international experts to develop a robust regulatory framework. Additionally, Carlos Senon Benito, a Financial Sector Specialist at the World Bank, emphasized that they have aided in creating a “taxonomy” of biodiversity finance. This standard will guide private banks in issuing biodiversity bonds aligned with national and global environmental objectives.
This taxonomy blends financial principles with environmental science, as noted by Angela Maria Angulo Daza, Senior Adviser to the Sustainable Finance Group at SFC. The standardized taxonomy broadens Colombia’s existing green finance criteria to include biodiversity objectives, aiming to reverse the alarming decline in wildlife populations.
Irina Likhachova from the IFC highlighted the importance of shifting investments from destructive business models to those that nurture natural regeneration. She indicated that sustainable financing is crucial to combat the detrimental economic effects resulting from biodiversity loss.
In Colombia, J-CAP advises on integrating environmental impact assessments within financial risk metrics. This guidance led to the $70 million biodiversity bond issued by BBVA Colombia and the IFC, directed towards reforestation efforts and wildlife habitat restoration. A subsequent bond for $50 million is anticipated, earmarked for projects like mangrove restoration and support for sustainable farming practices.
The roles of J-CAP and the ongoing support from international partners, including Switzerland and various countries, underscore the collaborative effort to cultivate biodiversity financing in Colombia. This initiative strives to ensure both environmental sustainability and economic growth in the country.
In conclusion, Colombia is taking significant strides in biodiversity financing by establishing regulatory frameworks and introducing innovative financial instruments such as biodiversity bonds. The involvement of the World Bank Group and various international stakeholders illustrates a concerted effort to enhance sustainable practices that support biodiversity conservation while contributing to economic resilience. These initiatives signify an important shift towards investing in nature-based solutions, vital for both environmental and economic sustainability.
Original Source: www.ifc.org
