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Costa Rica has embarked on a groundbreaking project to strengthen its sustainable finance framework and pave the way toward a sustainable economy and climate resilience. The project “Aligning the Financial Flows of Costa Rican Financial Sector with the Climate Change Objectives of the Paris Agreement” was officially launched on April 21, 2023.
Financed by the Green Climate Fund and the European Union through the EUROCLIMA Program, this initiative is aligned with Costa Rica’s ambitious goal of achieving zero emissions by 2050. The project aims to develop and implement a taxonomy of sustainable finance, providing a classification system for investments and economic activities that contribute to the country’s climate change objectives.
Private investment plays a crucial role in Costa Rica’s efforts to combat climate change, and the taxonomy of sustainable finance will help guide financial flows toward the necessary investments for building a sustainable, resilient, and inclusive national economy.
Multiple institutions are involved in this significant endeavor, including the United Nations Environment Programme (UNEP) and its Finance Initiative (UNEP FI), the European Commission, 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).
Costa Rica, renowned for its exceptional biodiversity, representing 6% of the world’s total, has long been at the forefront of global environmental leadership. By committing to sustainability, Costa Rica aims to demonstrate that addressing climate change can go hand in hand with development and job growth. Given its geographical location, the country is acutely aware of the risks posed by climate change.
Over the past three decades, Costa Rica has incurred significant fiscal costs due to the direct impacts of extreme hydro-meteorological disasters. To achieve its decarbonization objective and mitigate these risks, Costa Rica initiated the project “Aligning the Financial Flows of Costa Rican Financial Sector with the Climate Change Objectives of the Paris Agreement.”
The project aims to provide the Costa Rican financial sector with a well-defined framework that mobilizes private capital towards a low-emissions and climate-resilient economy. It also seeks to enhance the sector’s ability to adapt to the impacts of climate change. A key aspect of the project is the development of a taxonomy that establishes standardized, science-based, and internationally harmonized criteria for determining environmentally sustainable investments and economic activities.
The taxonomy will provide certainty to investors, prevent greenwashing practices, stimulate the growth of domestic green financial markets, and enhance the country’s attractiveness to international investors. By strengthening the resilience of the Costa Rican financial sector to climate change, the taxonomy will foster transparency and create an enabling environment for sustainable finance investments.
Overall, Costa Rica’s project to strengthen its sustainable finance framework represents a significant step towards achieving its decarbonization goals and building a more sustainable and climate-resilient future.
Source:
By: Natalia Vega, Roya Institute representative in Costa Rica