• The project “Aligning the Financial Flows of the Costa Rican Financial Sector with the Climate Change Objectives of the Paris Agreement” is financed by the Green Climate Fund and the European Union through the EUROCLIMA Program.
• The aim is to develop and implement a taxonomy of sustainable finance to classify investments and economic activities that contribute to achieving the country’s climate change objectives.
• The contribution of private investment is crucial to achieving Costa Rica’s climate change objectives. The taxonomy of sustainable finance will redirect financial flows toward the necessary investments to achieve a sustainable, resilient, and inclusive national economy.
San José, Costa Rica, April 21st, 2023 – Today, the project “Aligning the Financial Flows of Costa Rican Financial Sector with the Climate Change Objectives of the Paris Agreement” was presented in the Costa Rican capital, to support Costa Rica’s goal of achieving zero-emissions by 2050. The institutions involved in this initiative are the United Nations Environment Programme (UNEP), its Finance Initiative (UNEP FI), and the European Commission, along with the Ministry of Environment and Energy (MINAE), the General Superintendency of Financial Entities (Sugef), the General Superintendency of Securities (Sugeval), the Superintendency of Pensions (Supen), the General Superintendency of Insurance (Sugese), and the Central Bank of Costa Rica (BCCR).
The initiative aims to develop a national taxonomy of sustainable finance and support its implementation in the financial sector. At the same time, it will create a framework to map, quantify, and disclose climate-related financial risks. These methodologies and tools will also be tested in the portfolios of banks and insurers to assess their exposure to these risks and define mitigation strategies. In this way, the Costa Rican financial sector will be provided with the necessary guidance structure to mobilize private capital towards a low-emissions and climate-resilient economy and to strengthen its capacity to adapt to the effects of climate change.
“The UNEP Regional Office for Latin America and the Caribbean, along with UNEP FI, within the framework of this initiative, will support national authorities and the private financial sector in a joint effort to redirect financial flows towards a low-emission and climate-resilient economy aligned with the Paris Agreement”, said Piedad Martin, Deputy Regional Director of UNEP for Latin America and the Caribbean.
A significant private investment component will be necessary for Costa Rica to achieve net-zero emissions by 2050. Costa Rica’s taxonomy of sustainable finance seeks to guide private investment toward the required economic activities to achieve this goal. Costa Rican authorities will develop the taxonomy to provide standardized, science-based, and internationally harmonized criteria on which environmentally sustainable investments and economic activities can be considered.
The taxonomy aims to provide certainty to investors, prevent greenwashing, support the growth of national green financial markets, and increase the country’s attractiveness for international investors. In this way, “taxonomy will favor transparency and create a favorable environment for investments in sustainable finance,” said Enid Chaverri, Director of International Affairs at the Ministry of Environment and Energy (MINAE) of Costa Rica. “This will help quantify and reduce the financial gap to achieve the objectives of addressing climate change through the definition of public-private climate financing strategies,” the senior official added.
Katja de Sadeleer, Head of Political Affairs and First Counsellor at the Delegation of the European Union in Costa Rica, said that “while local specificities must be considered, ensuring comparability and interoperability of taxonomies across different jurisdictions provides credibility, integrity, and transparency to the market, allowing the mobilization of cross-border capital flows.”
At the same time, due to its geographical location, Costa Rica is highly exposed to risks associated with climate change. Official estimates show that, in the last three decades, the fiscal cost of the direct effects of extreme hydro-meteorological disasters varied between 0.3% and 1.7% of GDP per year, mainly concerning the repair and reconstruction of damaged infrastructure. Rocío Aguilar, Superintendent of the General Superintendence of Financial Entities (Sugef) and the Superintendence of Pensions (Supen), explained that “investments in climate-friendly projects are a great opportunity for financial institutions, as these investments tend to perform better. However, climate change poses several risks, such as increased loan defaults in areas affected by extreme weather events. Monitoring data on climate flows and risks will help us better identify them and visualize the financial sector’s contribution to national climate goals.”
In this sense, financial regulators and supervisors – Sugef, Sugeval, Supen, and Sugese -, who play a fundamental role in safeguarding the macroeconomic and financial stability of the country, are making great efforts to strengthen the resilience of the Costa Rican financial sector to climate change.
“The initiative will play a key role in building knowledge and capacity for national supervisors and financial institutions in climate stress testing. Its results will promote effective management of climate risks in the Costa Rican financial system,” added Tomás Soley, Superintendent of the General Superintendence of Insurance (Sugese) and the General Superintendence of Securities (Sugeval).
About the Ministry of Environment and Energy (MINAE)
The Ministry of Environment and Energy (MINAE) contributes to the improvement of the quality of life of the country’s inhabitants by promoting the sustainable management, conservation, and development of environmental and natural elements, goods, services, and resources whose direction corresponds to it by a legal provision or international agreement, ensuring the necessary and complete harmony between Costa Rica’s development activities, respect for nature, and the legal consolidation of citizens’ rights in this matter.
About the Financial superintendencies (Sugef, Sugeval, Supen y Sugese)
Financial superintendencies are responsible for supervising and regulating the entities participating in the National Financial System (banking, securities, pensions, and insurance), to contribute to financial stability, efficient market functioning, and the protection of financial consumer rights. Financial superintendencies recognize that climate change creates financial risks for supervised entities, which must be managed and mitigated. Furthermore, financial entities must direct their operations and investment flows towards activities aligned with sustainable development objectives. Therefore, financial superintendencies are committed to raising awareness, providing training, and promoting risks related to climate change and green finance in the Costa Rican financial system.
About the UNEP Finance Initiative
The UNEP Finance Initiative brings together a broad network of banks, insurers, and investors that collectively catalyzes action across the financial system for more sustainable global economies. For more than 30 years, the initiative has connected the United Nations with financial institutions worldwide to shape the sustainable finance agenda. It has established the world’s leading sustainability frameworks that help the financial sector address environmental, social, and governance (ESG) challenges. Convened by a secretariat based in Geneva, Switzerland, more than 450 banks and insurers with assets exceeding $100 trillion are working together to facilitate the implementation of the UNEP Principles for Responsible Banking and the Principles for Insurance Sustainability FI, as well as three network zero alliances convened by the UN. Financial institutions collaborate voluntarily with UNEP FI. The initiative helps them apply industry frameworks and develop practical guidance and tools to position their businesses in the transition to a sustainable and inclusive economy.
Source: UN Environment Programme
