IFC calls on Latin American banking sector to lead sustainable reconstruction

The International Finance Corporation (IFC, for its acronym in English), attached to the World Bank, urged private banking in Latin America to assume with “courage” a “leading role” in the “sustainable and green reconstruction” of the region, and thus cover the “huge gap” in financing that it suffers from.

To this end, the IFC, the body of the World Bank in charge of loans to the private sector, allocates an average 35% of its global investment operations (about US $ 25,000 million annually) to support measures of the banking sector “aligned” with strategies and sustainable climate finance.

Take a leading role

The banking sector in Latin America has in its hands the inescapable responsibility of “betting on sustainability” to “mitigate” the effects of climate change on the planet, said Carlos Serrano, head of the IFC for climate consulting services for the financial sector in Latin America.

Serrano made these comments while the 55th Annual Assembly of the Latin American Federation of Banks (felaban) takes place, which has the support of the IFC and is held in Hollywood (Florida) until this Tuesday.

An appointment that served for the IFC to announce the celebration in Brazil in 2022 of the first Latin American Congress of Sustainable Banking, the cornerstone of a broader strategy with a view to promoting the sustainability agenda and accelerating the transformation of banks in the region.

In this context and under the deep cross-cutting impact of the pandemic, Serrano urged financial sector leaders to accept the “commitment to become agents of change” in the region, where 70% -80% of “total financing” , he recalled, is in the hands of the bank.

“The bank cannot continue being as it was. It has to become a sustainable bank ”and“ align ”with the objectives of the United Nations 2030 Agenda on sustainability and the pact against climate change.

Banking main barrier

However, the banking sector faces a series of barriers to a clear sustainability strategy, the main one being the “lack of knowledge”, a deficiency that the IFC has been fighting for a few years with the creation of the Green Banking Academy, which has already trained to more than 20,000 banking professionals in the region.

But this “lack of clear policies to bet on sustainability and the climate dimension” is also the responsibility of the governments of the hemisphere, which should put a price on carbon emissions, said the expert from IFC’s advisory and training services.

He insisted on the need for “policies that favor sustainability” in the region and sent a message to financial institutions by ensuring that “the greatest risk is not being (sustainable)”, since, he pointed out, “sustainability is the greatest opportunity. of business that the bankers have before them ”.

A business opportunity estimated at US $ 23,000 billion (in Spanish, million million) globally until 2030 in climate investment.

He then established a sort of decalogue with four tips on sustainability in the banking area in the area of ​​“financing” (economic growth), “social” (equality, poverty reduction, microfinance), “environmental and climate” and, finally , that of a “good corporate governance”.

This would crystallize in a dimension where “people and the planet” enjoy prosperity, because in the end, he said, “sustainability is always profitable.”

The pandemic and social and economic decline

Regarding the pandemic, although its “enormous” impact has meant a “setback in the social and economic agenda” with an increase in poverty and inequality, it is also true that it entails a “fantastic opportunity” by opening a path for “Sustainable reconstruction” of cities, buildings and societies, he stressed.

“I call on the private and banking sectors to play a leading role” in “economic growth” in Latin America, given the “limited” financing and action capacity of public banks.

Only in this way will it be possible to bridge the enormous climate financing gap, which in 2020 was US $ 600,000 million, when an investment ten times greater is needed to comply with the Paris Agreements of 2015 to face the climate crisis and accelerate decarbonization and ecological transition.

In fact, and despite the fact that “ten times more financing is needed”, the IFC expressly supports “banks and companies with training, financing and advice”.

Serrano concluded with the recommendation to private banking that they build a “brave and visionary senior management” that understands the risks and opportunities derived from climate change, “incorporates climate change into the process of their financial assets” and “develops products and services with environmental benefits ”.

The United Nations 2030 Agenda for Sustainable Development Goals, approved in 2015, provides a historic opportunity for Latin America to develop a plan to address poverty and inequality, protect the environment, and stimulate a strong and lasting recovery.

To achieve these goals by 2030, the region needs to mobilize between $ 3 billion and $ 14 billion a year in financial resources.

In fiscal 2020, it invested $ 22 billion in private companies and financial institutions in this group of countries, leveraging the capacity of the private sector to help end extreme poverty and boost shared prosperity.