Colombia is leading the path for Green Finance in Latin America

Colombia is leading climate action in Latin America and the Caribbean (LAC). In 2020, the country carried out its update of the NDC seeking to be more ambitious and be able to achieve 51% of the reductions in GHG emissions by 2030. Additionally, it has worked on a series of policies and strategies that support this ambitious plan such as the Framework Convention on Biological Diversity, the National Development Plan, the Green Growth Policy, the National Climate Change Policy, the Climate Change Law 1931 of 2018, the National Adaptation Plan, among others.

The State of the Market

Colombia has issued USD1.3bn across GSS bonds as of  June 30th, 2021. Like the rest of LAC, the green theme is the most established in Colombia, with 52% of the total issue volume. Yet sustainability and social labels are increasing their share in the country with a relatively even share, respectively 26% and 22%. Colombian issuers have not really tapped international markets; almost all issuances across all GSS bonds are denominated in Colombian Pesos.

Number of green bonds increased in 2020 vs 2019

As of our previous report in 2019, to the new one released in September 2021, two issuers have come to market in Colombia: one non-financial corporate and one financial corporate. Financial Corporates continue to represent the majority of green bond issuers in the country, with 65% of the cumulative issue volume. The number of green bonds increased in 2020 compared to 2019 with three green bonds coming to market. Two in August by ISA, whose USD38m and USD43m deals will be used to fund solar and wind energy projects. The other bond was issued in September by Banco de Bogotá in two tranches. Its USD48m and the USD30m tranches went towards renewable energy, low carbon buildings, low carbon transport, and land use (agriculture and forestry). The bonds from Grupo ISA and Banco de Bogotá received SPOs, as external review.

2021

In September of this year, Colombia surprised with two important milestones within its climate action plan: the launch of a national green taxonomy and the issuance of the first sovereign green bond in the local market.

Sean Kidney, CEO, Climate Bonds Initiative

"We are thrilled to see Colombia set an example for other countries in the region. We hope the Colombian Taxonomy will boost more issuances in the near future."

Taxonomy

The Colombian Government presented Phase 1 of the country's Green Taxonomy for comments. The Taxonomy seeks to facilitate the identification of projects with environmental objectives, develop green capital markets, and promote the effective mobilization of private and public resources towards investments that allow the fulfilment of the country's commitments.

Given the global nature of financial markets and environmental challenges, the best practices of environmental sustainability and classification systems were incorporated in the construction process of the technical documents - such as the green taxonomy of the European Union, that of the Climate Bonds Initiative, the Green Bond Principles and the United Nations Sustainable Development Goals. Likewise, it recognizes that there are important local and regional differences and that the process of designing and updating the green taxonomy has taken into account the challenges, capacities and specific realities of Colombia.

Climate Bonds Initiative provided technical support, financed by UK PACT, along with the IFC - International Finance Corporation and The World Bank to La Mesa Institucional de Taxonomía (Ministerio de Hacienda y Crédito Público, Superintendencia Financiera de Colombia, National Planning Department DNP, Departamento Administrativo Nacional de Estadística - DANE Colombia & Ministerio de Ambiente y Desarrollo Sostenible de Colombia) for the development of this Taxonomy.

Public Consultation for Colombia's Green Taxonomy(link is external) started on September 17th and is now open until October 22nd. If you would like to share your comments and suggestions, please contact FinanzasverdesSFC@superfinanciera.gov.co (link sends e-mail) and taxonomia@minhacienda.gov.co (link sends e-mail)

Colombia's first Green Sovereign Bond 

On 29 September, Colombia issued its first green sovereign bond in local currency for a total amount of COP $ 750,000 million (approx. USD$200 million). With the green bond, the Latin American country hopes to raise about 2 billion Colombian pesos to finance environmental investment projects.

Proceeds from this issuance aim to promote compliance with the environmental goals established by the national government and international commitments to finance projects on the following areas: 40% related to water management; 27% in the transition of transport towards a cleaner and more sustainable system; 16% in the biodiversity protection; and 14% in migration to non-conventional renewable energies in the national territory.

We are excited to see what's next for Colombia. Stay tuned!

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