Latin America and the Caribbean’s financial systems must look at the circular economy not just as a product but also as a systemic approach, to take advantage of its full potential, according to the latest study Financing the Circular Economy: The Colombian Experience, published by the Inter-American Development Bank and IDB Invest, in collaboration with Bancolombia, Banco de Bogotá and Bancóldex.
The study analyzes the role of the financial system in the transition to circularity from the Colombian experience, which among others would allow achieving the Paris Agreement commitments, facing the climate crisis and protecting biodiversity.
In Colombia alone, there is an annual potential of $11.7 billion in efficiency and effectiveness savings in the use of materials, new business opportunities and strengthening of value chains, according to the National Circular Economy Strategy (ENEC).
The report explains which are the recommended criteria for analyzing and categorizing circular economy projects, and proposes a methodology that allows identifying funding opportunities that meet the circular transition objectives, and at the same time contribute to achieving the Sustainable Development Objectives (SDGs), the emission reduction targets and a just transition, namely an inclusive economy for all.
Likewise, the study proposes a practical tool, a classification system, to identify and categorize circular projects, report circular financing in a transparent and homogeneous way, and measure positive impacts at an environmental and social level.
The report includes three pilot projects with the objective of methodologically testing the classification system for circular projects in collaboration with the three Colombian banks that participated.
The funding process for circularity requires transparent classification systems that facilitate the process of identifying circular projects, measuring, and reporting the environmental, social and economic benefits. At a global level, some $45.5 billion have been invested to finance this transition, through debt instruments including green, social and sustainable bonds.
About IDB Invest
IDB Invest, a member of the IDB Group, is a multilateral development bank committed to promoting the economic development of its member countries in Latin America and the Caribbean through the private sector. IDB Invest finances sustainable companies and projects to achieve financial results and maximize economic, social and environmental development in the region. With a portfolio of $15.3 billion in asset management and 375 clients in 25 countries, IDB Invest provides innovative financial solutions and advisory services that meet the needs of its clients in a variety of industries.
About the IDB
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social, and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research projects and provides policy advice, technical assistance, and training to public- and private-sector clients throughout the region.
BASE is a Swiss foundation and partner specializing in the UN Environment Programme that specializes in the development of innovative and market-based business models and financing strategies that facilitate and accelerate investments and financing to face the challenges of climate change and move towards a more sustainable economy. He has spent more than 15 years working with financial institutions in Latin America, Europe, Asia, Africa and the Pacific in the development of sustainable financial products and services such as circular economy, green finance lines, electrical mobility, renewable energies and energy efficiency, green lines, blue lines, adaptation, among others.