- Climate change is having a dramatic effect on Latin America and the Caribbean.
- Most people in the region view climate change as a major peril.
- Costa Rica, Chile and 21 regional countries have announced plans to become “net-zero” emitters by 2050.
Protests have rattled governments across Latin America and the Caribbean in recent months as people demand higher wages and lower levels of inequality.
Does that mean protesters no longer care about long-term challenges like climate change? Absolutely not. Polls consistently show that people fear climate change far more than do people in other regions.
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Last year, the AmericasBarometer survey showed that vast majorities in Mexico, Central America, South America and the Caribbean believe climate change is a perilous problem. More recently, a Pew survey showed they worry about it much more than other global threats.
That’s partly because the region is already suffering from dramatic climate events including extreme flooding, droughts and devastating hurricanes like Dorian, which destroyed much of the Bahamas.
Such events, if left to worsen, could change life in the region but also around the world by affecting the global output of everything from coffee and chocolate to beef, chicken and corn.
Local targets, global challenge
That makes the impact of climate change on the region relevant to everyone, not just Latin Americans. It also explains why local governments are ambitiously aiming to cut CO2 emissions, even as they grapple with urgent social problems and street protests.
Costa Rica, Chile and 21 regional countries have announced plans to become “net-zero” emitters by 2050. But they will need a huge amount of help from investors to fund such ambitious plans.
We estimate regional governments must spend about $77 billion between now and 2030 to meet their climate change goals. Public investment can cover only about a quarter of that while a tiny share could come from multilateral banks. The rest will have to come private sector investors.
The good news is that trillions of dollars in private sector assets are available to close this financing gap. Global pension funds alone hold more than $40 trillion in assets, according to the Thinking Ahead Institute.
Many companies also need to invest more in green projects to fulfill their own environmental, social and governance (ESG) goals. But investors will only invest en masse in environmentally friendly public projects if it is easy to do—and if they’re confident their money will truly make a difference.
What’s the World Economic Forum doing about climate change?
Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum's Global Risks Report continues to rank these environmental threats at the top of the list.
To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.
The World Economic Forum's Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.
This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.
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Investors need guarantees that their cash will fund environmentally sustainable projects, and not simply be used to build bridges or fund budget gaps.
This is where institutions like the Inter-American Development Bank can help. We are working with partners like the French Development Agency and Germany’s state-owned development bank, KfW, to help countries curb emissions and promote green-friendly investment regulations.
We also recently launched the Green Bond Transparency Platform, which allows investors to track bonds and see how their proceeds are being used.
Initiatives like this will boost investor interest in projects that combat climate change in Latin America. Fortunately, appetite for things like green bonds is on the rise and set to surge—if we do our job.
In 2019, Latin American and Caribbean countries issued close to $5 billion in green bonds, bringing the region’s overall historic total to $13.6 billion, according to the Climate Bonds Initiative. In mid-2019, more than 300 investors showed interest in buying Chilean green bonds. Now, those bonds are helping Chile invest in things like green buildings and electric buses.
Green bonds are finally becoming a mainstream investment option in Latin America. Even so, they account for just 2% of the global green bond market.
To truly combat climate change, we need to make it even easier, and more attractive, for investors to help countries go green.
We can do better and we must. Our citizens are demanding it.