Panama City, 10 July 2023 – A Common Framework of Sustainable Finance Taxonomies for Latin America and the Caribbean (LAC) was launched today by a group of United Nations agencies and international organizations to accelerate progress towards unified and strengthened national sustainable finance taxonomies in the region.
The LAC region has been classified as “highly exposed, vulnerable and strongly impacted by climate change” in the IPCC reports of 2022. To address this existential threat and align economies with the UN Sustainable Development Goals, governments in the region and globally are developing sustainability taxonomies at a rapid pace. However, a lack of comparability between national taxonomies creates hurdles for trade and international capital flows towards low-carbon projects.
The LAC Taxonomy Common Framework aims to serve as a catalyst for progress towards sustainable finance implementation, offering LAC member states a regional alignment approach to unlock opportunities and financing for long-term value creation, shared prosperity, and sustainable development in the region. The guiding principles established in the report ensure taxonomies are science-based, allowing for a credible transition for high emitting sectors towards net-zero emissions by 2050 and improving the adaptability and resilience of assets and activities across all sectors.
“This Common Framework will add a significant value to the taxonomy development process in the region, especially for Central America. The technical guidance will streamline this process and ensure interoperability with other taxonomies”, said Karina Velásquez, Executive Secretary of the Central American Council of Superintendents of Banks, Insurance and Other Financial Institutions (CCSBSO).
By establishing essential guiding principles, designing objective classification systems for sectors and activities, and drawing upon the European Union and other international best practices, the LAC Taxonomy Common Framework ensures high level of transparency and interoperability, thus facilitating cross-border capital flows for social and environmentally sustainable investments. The report also enables private sector actors to make more informed investment decisions by offering clear guidance on green and social investments.
“Chile is in the process of developing the taxonomy and this regional work is published at a right time. The region is setting an example for other countries and the world to follow by ensuring that the definitions of sustainable investments are aligned globally and in LAC, supporting long-term economic growth and encouraging better social and environmental stewardship in the region”, said Carola Moreno, Finance and International Affairs Coordinator of Chile’s Ministry of Finance.
To further advance regional and international interoperability of taxonomies, international cooperation plays a key role. The LAC Taxonomy Common Framework will help governments and other relevant entities in Latin America and the Caribbean formulate interoperable sustainable finance taxonomies with the technical assistant provided by the members of the Working Group on Sustainable Finance Taxonomies for Latin America and the Caribbean.
This framework was financed by the European Union through the EUROCLIMA+ Programme and was technically developed by the Working Group on Sustainable Finance Taxonomies for Latin America and the Caribbean. This Working Group was built as part of the Interagency Technical Committee (ITC) of the Forum of Ministers of Environment of Latin America and the Caribbean and consists of the United Nations Environment Programme (UNEP) and its Finance Initiative (UNEP FI), the United Nations Development Programme (UNDP), the International Finance Corporation (IFC), the Inter-American Development Bank (IDB), the Economic Commission for Latina America and the Caribbean (ECLAC), the Development Bank of Latin America (CAF), the Food and Agriculture Organization, the staff of the International Monetary Fund (IMF) and the World Bank and the European Commission as an external advisor.
Download the LAC Taxonomy Common Framework here.