Partnerships are pivotal in advancing the climate, biodiversity, and natural capital agenda in Latin America and the Caribbean (LAC). They foster cooperation among diverse stakeholders to address complex development challenges while unlocking the region’s full potential. By forging alliances between governments, international organizations, civil society, academia, and the private sector, these partnerships leverage synergies to drive impactful solutions. They also facilitate the exchange of best practices, innovative technologies, and financial mechanisms, enabling the scaling up of decarbonization, adaptation, and climate resilience efforts.
At the IDB, we manage and promote teamwork with hundreds of diverse partners who contribute their resources and knowledge to complement and maximize our goal of sustainable and inclusive development.
Over a year has passed since our last publication regarding the joint efforts between the IDB and the International Climate Initiative (IKI). It is time to take stock of our current position and focus on the impact achieved by our joint portfolio.
As of today, IKI has mobilized EUR 80.3 million through various IDB projects and initiatives.
Let’s explore a few of these impactful alliances.
Driving Climate Action Through Public Development Banks
The LAC Green Finance Facility has played a crucial role in addressing financial and non-financial barriers to climate investments across various sectors. Specifically, the Facility targets unlocking private investment for climate mitigation and sustainable businesses through Public Development Banks (PDBs). It does so by tailoring financial strategies for each PDB, using a mix of instruments like guarantees and extended credit lines, while also providing non-financial support such as technical assistance and capacity building.
Since its inception in 2016, the Facility has supported a variety of entities, including PDBs, government institutions, financial innovation labs, and green finance dialogues. The program has mobilized public and private investments by backing eleven green credit lines, four green or sustainable bonds, two Green Climate Fund proposals for energy efficiency and bioeconomy in the Amazon, and analyzing the integration of sustainability criteria into pension fund investments in Chile.
Furthermore, the Facility contributed to the creation of the Green Bond Transparency Platform, the LATAM Projects Hub platform, the GreenFinanceLAC knowledge web platform, and the piloting of climate risk heatmaps to help PDBs identify the physical climate risks in their portfolios. This initiative has catalyzed over $700 million in sustainable investments across Brazil, Chile, Colombia, Mexico, Paraguay, and Uruguay.
Greening Public Development Banks and the Financial Sector
Building on the success of this initiative, at the end of last year, Germany’s Federal Ministry for Economic Affairs and Climate Action (BMWK) pledged EUR 20 million in grants to establish the LAC Facility for Greening Public Development Banks and the Financial Sector. This facility aims to assist public development banks in evaluating their portfolios, integrating climate and socio-environmental risks into decision-making processes, promoting increased green lending, and facilitating access to climate and capital markets finance.
This new facility introduces an innovative sustainability-linked performance mechanism, incentivizing public development banks to strengthen their institutions and increase their portfolio share in alignment with the objectives of the Paris Agreement. This shift represents a move from a transaction-based approach to a more holistic strengthening of public development banks. The facility’s objectives align with the recently approved IDB Institutional Strategy (IDBImpact+), specifically with its two pillars: Innovative Instruments and Mobilization, and Institutional Capacity, by developing an enabling environment for private sector development.
The facility also supports the Green Coalition of Public Development Banks by increasing institutional capacity and sustainable financing in the Amazon region, with an expected leverage of more than $1 billion in private climate funding.
Strengthening Green Fiscal Policies
IKI has been instrumental in funding the Fostering Fiscal Policy for Climate Change Fund since its launch in 2021. The Fund serves three key purposes: providing technical assistance to regional ministries of finance for designing and implementing comprehensive climate action plans, supporting regional technical assistance projects and institutional capacity building, and enhancing the work of the Regional Climate Change Platform of Economy and Finance Ministries of LAC.
The IDB serves as the technical secretariat of the Regional Climate Change Platform of Economy and Finance Ministries, facilitating governance improvement through knowledge exchange experiences within the region’s finance ministries. The platform has already produced documents such as a practical guide on thematic emissions, an analysis of climate financial strategy implementation, tools for green public investment and financial management, and policy documents to aid ministries in establishing carbon pricing mechanisms. At the recent Third High-Level Dialogue of the Platform in Belize, ministries adopted the Regional Vision for Sustainable Finance and activated the Platform’s accountability mechanism. The newly approved 2024-2025 work plan also introduced new topics and working groups, including a focus on biodiversity and natural capital.
Promoting Water Security through Nature-Based Solutions
In partnership with the IDB, FEMSA Foundation, The Nature Conservancy (TNC), and the Global Environment Facility (GEF), IKI has supported Water Funds. This initiative involves providing scientific knowledge to achieve and maintain water security through nature-based solutions in Brazil, Colombia, Guatemala, Ecuador, and the Dominican Republic. IKI contributes to the systematization, management, and dissemination of knowledge, as well as capacity-building and technical monitoring within the context of Water Fund interventions. Together, partners have invested over $17.4 million in the region, leading to the creation of 26 Water Funds, benefiting more than 125,000 families and contributing to the restoration and conservation of 500,000 hectares of land. These initiatives engage over 300 local partners.
The long-standing cooperation between the IDB and the German government through IKI has facilitated the implementation of climate and biodiversity actions across the region, as well as the development of regulatory and fiscal frameworks to support innovation, scale-up efforts, and establish incentives for investment. This partnership underscores the importance of sustained collaborations in tackling climate and development challenges in Latin America and the Caribbean.
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