The global green bond market hit USD 160 bn in 2017 and is estimated to reach 250 bn this year, with China becoming the world’s second-largest issuer (behind only the US) in less than three years since the first bond was issued in 2015. This is clear evidence of how the green economy is growing in a country that at the moment is also creating growth opportunities for its neighbors in the whole Asian region and could open doors for Latin America and the Caribbean (LAC) as well. That’s why this May 120 policy makers, financial regulators, and practitioners from over 35 countries in Asia, Africa, and Latin America met for the Global Green Finance Leadership Program (GFLP) in Beijing to discuss possibilities for greening their economies and to debate innovative financing and policy tools to mobilize capital towards low carbon investments.
Participants at the GFLP presented and discussed recent achievements and policy innovations from China in the world of green finance. They looked at established green taxonomies for investment (such as the Chinese green bonds guidelines), discussed booming green bond markets, and learned about preferential regulatory treatment for green financial assets as well as pilot programs, such as loans for solar energy panels that pose no direct cost to project owners. Especially interesting for LAC stakeholders is China’s growing capital market, which permits the issuance of foreign green bonds or “Panda Bonds”, meaning that LAC countries have access to one of the world’s largest markets for climate financing. The GFLP was an eye-opening knowledge-sharing experience for the participants that revealed practicable approaches to a greener economy.
The GFLP is an example of the type of South-South collaboration that the Inter-American Development Bank (IDB) is keen to support. In this vein, the IDB also launched a new program in 2017, Building Green Finance Instruments and Systems in LAC from the Experience of China (Green LAC China or “GLC”). GLC promotes green finance on two levels: by supporting the institutional capacity building of national development banks (NDBs) and financial market regulators in LAC, and direct engagement and knowledge sharing between peer institutions in the two regions. The program was launched with a mission to China in March 2017 when 21 representatives from LAC NDBs, financial institutions, regulators, and other relevant stakeholders spent a week learning from the experience of public and private banks, regulators, stock exchanges, and commercial companies. This mission helped identify focal points for the program, which in its first year centers around three main topics:
- Development and implementation of green financing strategies and regulatory approaches.
- Development of domestic green bond markets in LAC and access to international capital markets.
- Piloting innovative techniques for climate risk management in financial institutions, such as the climate stress testing tools developed by the ICBC Bank in China in 2016.
The third focal point, risk management, is becoming especially important. The World Economic Forum’s Global Risks Landscape 2018 shows that extreme weather events, natural disasters, and failure of climate-change mitigation and adaptation are the three greatest risks facing the world in terms of combined likelihood and impact.
Together with the financial potential of the global green bond market, the real threat posed by these risks make it imperative that countries evaluate possibilities for green strategies. GLC supports this effort in a variety of ways, from exchange visits and strategy consulting to virtual exchange in the form of webinars. The first green finance webinar series premieres June 5 with Green Bonds, followed by Climate Stress-Testing on June 12. Details and links to registration can be found below:
Webinar: From Zero to Hero – Lessons and experiences from the growth of the Chinese green bond market
June 5, 2018, 3:00 – 4:00 p.m. EDT
Webinar: Mitigating Systemic Risks (Webinar in Spanish)
Mechanisms for evaluating climate change risks and stress-testing public bank portfolios
June 12, 2018, 11:00 a.m. – 12:00 p.m. EDT
We hope to see you online soon and stay tuned for more knowledge-sharing opportunities to come!
Créditos de la foto: skeeze
Contributor: Diego Heatherman has worked on sustainability, social innovation, and new business development for the last four years and is currently supporting the Inter-American Development Bank’s (IDB) green finance team. Most recently he spent time with the German development agency GIZ in Morocco, implementing management and monitoring processes for new project structures. Before Morocco, Diego worked in Macedonia, the U.S., and Austria in the fields of social entrepreneurship and public engagement, designing and facilitating workshops and coordinating program logistics. Diego has an MSc in Socio-Ecological Economics and Policy from the Vienna University of Economics and Business and a Bachelor’s in Economics from the University of Vienna in Austria.