Market Regulators for Development

Network of Regulators for Sustainable Development (REDES)

Sustainable finance can be broadly understood as financing, and institutional and market arrangements to the achievement of strong, sustainable, balanced and inclusive growth. The Sustainable Development Goals (SDGs) are usually used as a framework to determine it.

A proper framework for sustainable finance development may also improve the stability and efficiency of the financial markets by adequately addressing risks as well as market failures such as externalities. Read More


 

Scope of Activities

Intersectoral Dialogue

Including regional workshops and other initiatives to create awareness and identifying the main challenges regarding ESG and climate risks within the financial sector.

Technical Support

To the beneficiary institutions providing insights, criteria, recommendations, and best practices on public policies aimed to address and mitigate ESG risks and its impact on the financial system, as well as to foster sustainable finance.

Training and Capacity Building

Workshops and other activities to create awareness and understanding of ESG issues and develop sustainability-related analytical capabilities.

Technical Studies

Including frontier knowledge and understanding of the current worldwide initiatives and analysis for identification of best practices on ESG risks and policies, reorganization, or applicability of technologies, among others.


 

Where it is implemented

REDES will support LAC central banks, financial regulators, supervisors, and any other governmental agencies in two areas. First, strengthening institutional capacity, and, second, disseminating and sharing knowledge with the overall objective of promoting the development of country-level strategies for a sustainable finance market, regulatory, and supervisory practices.


 

Why Sustainable Regulation?

The financial sector increasingly acknowledges environmental and social as significant risk factors. ESG risks can hurt the performance of financial corporations due to exposures on credit, legal, market, operational and reputational risks. Sustainable growth requires public policy frameworks and sustainable regulations, and supervision, conducive to providing certainty for investors and industry. This also means innovative financial instruments and tools to support financial risks assessment stemming from this new landscape.


Sustainable regulation allows overcoming barriers to sustainable finance:

Improving the awarenessImproving the awareness and knowledge of regulators and financial supervisors to understand, assess, monitor, and supervise ESG and climate risks within the financial sector.
Enhancing sustainability relatedEnhancing sustainability-related analytical capabilities for financial authorities.
Incorporating ESGIncorporating ESG and climate-related risks into financial risk assessment, regulation, and supervision.


Creating transparencyCreating transparency and a long term mindset within the financial sector regarding ESG issues.
Aligning public policiesAligning public policies and financial regulations to a long-term strategy to promote and mobilize mainstream sustainable finance.

 

Partners on the Ground


This Initiative is being promoted by the IDB with support from the Association of Banking Supervisors of the Americas ASBA and the Network of Central Banks and Financial Supervisors for Greening the Financial System, NGFS.


 
Resources
  • Stay updated on the latest trends of Green Finance

First “taxonomy” created to identify private sector solutions for investing in climate adaptation and resilience

NEW YORK, The Lightsmith Group (“Lightsmith”) today released the ASAP Adaptation Solutions Taxonomy (“ASAP Taxonomy”). This is the first peer-reviewed set of definitions and eligibility criteria specifically focused on climate adaptation solutions being offered by private sector companies. The ASAP Taxonomy was developed through the Adaptation SME Accelerator Project (“ASAP”), which is supported by the Special Climate Change Fund (SCCF) of the Global Environment Facility, Conservation International, and the Inter-American Development Bank and IDB Lab. It builds upon existing definitions and international standards around climate finance, such as the European Union’s Sustainable Finance Taxonomy, the Intergovernmental Panel on Climate Change, the Task Force on Climate-related Financial Disclosures (TCFD), and the UNFCCC Climate Technology Centre and Network (CTCN) Taxonomy, among others, in order to foster harmonization and uptake. The ASAP Taxonomy has been reviewed by a panel of global experts and is actively being applied to identify hundreds of private companies across the globe that offer climate adaptation solutions. “We need practical solutions to help us adapt to climate change now,” said Jay Koh, Managing Director of Lightsmith. A recent study by the University of Cambridge shows an additional $100 billion of global costs annually linked to extreme weather events – such as floods, heatwaves and droughts – can be expected by 2040. The UN Environment Program estimates the cost of adapting to climate change in developing countries alone could rise to $140 to $300 billion per year by 2030, and between $280 and $500 billion per year by 2050. Despite the fact that 75% of all national climate plans under the Paris Agreement reference climate adaptation, adaptation received less than 6% of the total $579 billion of climate finance in 2017/2018, with perilously little from the private sector, according to the Climate Policy Initiative. “Identifying companies that can help manage drought, flood, wildfire, supply chain disruption, disease, and other climate impacts is a critical first step to building resilience to climate,” added Koh. “Most of these companies do not call what they do ‘climate change anything’ but if we can find them, we can invest in and scale up their solutions as the challenge of climate change grows.” ASAP recognizes the important role that small and medium-size enterprises (“SMEs”) can play in supporting climate adaptation. SMEs generate at least 45% of employment and as much as 33% of GDP in developing countries. The ASAP Taxonomy offers a systematic approach to identify SMEs that produce technologies, products, and services that support adaptation to climate change (“Adaptation SMEs”) and enables investors and governments to target investment and support. “The timing of the new ASAP taxonomy is crucial. With SMEs in developing regions and especially Latin America and the Caribbean confronting both the economic fallout of the pandemic and worsening climate impacts, we should take full advantage of this new taxonomy to support them to continue to capitalize on the business opportunities to develop solutions for climate adaptation and resilience,” said Graham Watkins, Climate Change Division Chief of the Inter-American Development Bank. The ASAP Taxonomy specifically focuses on SMEs in developing countries but can be easily extended to apply to businesses of all sizes, operating in all geographies. The ASAP Taxonomy is comprised of (i) a definition of an “Adaptation SME”, (ii) eligibility criteria to determine what types of companies qualify as an “Adaptation SME”, (iii) classification systems for climate adaptation solutions, and (iv) a results framework to measure, monitor and report on climate adaptation- related outcomes. The ASAP Taxonomy can be used by investors, funders, companies, and other stakeholders to: -Identify climate adaptation investments, thereby enabling more accurate tracking and reporting; -Sets out a menu of classification approaches for categorizing, tracking, measuring and reporting climate adaptation solutions based on the technology, product, service provided; -Inform companies on how their solutions may support climate adaptation and resilience; -Provide initial guidance on approaches for measuring companies’ contributions to climate adaptation; and; -Create a framework that can be used to align climate adaptation and resilience investment strategies with international standards and definitions. “The release of ASAP Taxonomy is an important contribution to increasing private sector investment in climate change adaptation. Through a common language, the taxonomy will help classify climate adaptation business solutions and eventually support investors and SMEs understand market opportunities and track investments. The taxonomy’s focus on Adaptation SMEs will contribute to climate resilient and inclusive global economic recovery from the COVID-19 pandemic”, said Chizuru Aoki, Lead Environmental Specialist and Manager of the Least Developed Countries Fund and the Special Climate Change Fund. “The ASAP Taxonomy is a significant step toward building the case for climate adaptation as an investment asset class and mobilizing much needed capital flows to adaptation-focused SMEs,” said Agustin Silvani, Senior Vice President of Conservation Finance at Conservation International (CI). “Both investors and businesses will benefit from a better understanding of the scope of climate adaptation investing. CI congratulates Lightsmith and all involved in the production of this valuable resource.” By using the ASAP taxonomy, investors, funders, companies, governments, and policymakers can enhance the supply and uptake of climate adaptation solutions globally, and especially in the places where they are needed most. The full ASAP Adaptation Solutions Taxonomy can be downloaded here.


Events


BIODIVERSITY IN ENVIRONMENTAL IMPACT ASSESSMENT

This course provides a knowledge base on accepted good practices for the effective incorporation of biodiversity into the...



 

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