Latin America has abundant and essential natural resources for the global energy transition. But what about its financial market?
A recent McKinsey report analyzes how Latin American countries are transforming their financial sectors, sustainability programs and environmental commitments. Before elaborating on these regulatory actions, look at the regional "competitive advantages":
Voluntary carbon credit markets. Brazil should reach US$ 15 billion in 2030 and US$ 35 billion in 2040
34% of the global reforestation potential is in Latin America
Argentina, Bolivia, Brazil and Chile have large reserves of lithium and other mineral resources
Potential - in excess - for multiple sources of renewable energy, even presenting opportunities for export
Biofuel production expanding in Argentina, Brazil, Colombia and Guatemala
Great investment opportunities in sustainable agriculture, livestock and fishing processes. Highlight for Chile, Ecuador and Mexico. Business opportunities related to biodiversity, tourism and biomedical research
In addition to carbon capture and storage technologies.
It is clear that the regional financial system and its regulators need to develop regulatory frameworks that incorporate sustainability criteria, environmental risks and opportunities. While most Latin American countries are still in the early stages, here's what legislators in Brazil, Mexico, Chile and Colombia have already proposed:
The Central Bank of Brazil launched new disclosure requirements and established rules for banks to incorporate environmental, social and governance (ESG) considerations and climate risk analysis. The Securities and Exchange Commission works to align sustainability disclosures with international standards.
Mexico launched the “sustainable financial taxonomy” and has promoted methodologies for measuring ESG risk and investment opportunities. The National Securities and Exchange Commission is establishing ESG-related disclosure requirements.
Chile issued sustainability reporting and sustainable finance disclosure standards
Colombia adopted a “green taxonomy” that provides a set of standard classifications of sustainable activities
Click the image below for this great McKinsey study.
You may also be interested in Carbon Credit Markets posts related to banks.
