In April 2022, the Colombian Government launched the first Taxonomy in Latin America and the Caribbean (LAC) to support the mobilization of capital for sustainability objectives. This milestone not only marks the region's first-ever taxonomy but also positions Colombia as a trailblazer, with a high level of interoperability with the EU Taxonomy. Aligning with international standards and in line with the Paris Agreement's 1.5°C trajectory, it responds to the Nationally Determined Contributions (NDCs) acquired on the Paris Agreement.
The Colombian Green Taxonomy (Taxonomía Verde de Colombia - TVC) establishes how an investment can contribute to climate mitigation and adaptation and five other environmental goals. A taxonomy works like a shopping list, signaling to investors that assets and activities can be financed for a green future. It is the starting point of sustainable finance policies. In February 2024, the Taxonomy Supervisory Committee, led by the Financial Superintendency (SFC) and the Ministry of Finance (MHCP) of Colombia, introduced two game-changing usability guidelines.
Crafted for both general and banking sector users, these guidelines serve as official tools, simplifying the application of TVC in the financial and non-financial sectors. The guidelines are outlined in the official document, published by the SFC, which officialized the adoption of the taxonomy and encourages the use of taxonomy for labeling green bonds, investment portfolios, and voluntary pension funds (External Circular 005 of 2022).
These guidelines were authored by Climate Bonds Initiative, Metrix Finanzas, and Ambire Global, in the framework of the project "Greening the Colombian financial system: Implementing local green definitions to enable long-term investment in priority sectors" through the support of the UK PACT program from the Government of the United Kingdom.
The General TVC Implementation Guideline targeting a diverse audience ranging from private companies to financial consumers, provides a practical roadmap for meeting TVC eligibility criteria at the sector and activity levels, complying with its general and specific requirements and social safeguards. It also provides insight on how to approach and align those activities related to energy efficiency which is not mentioned explicitly in the Colombian Taxonomy. With practical examples, visual graphs, and strategies for analysis and management, this guideline is set to be a game-changer in fostering sustainable finance policies.
Specifically designed for banks and financial institutions, the TVC Implementation Guideline on Green Credit Management offers strategic, operational, and technical recommendations. It provides a list of recommendations to improve the assessment of social and environmental risks for green credits. This guideline aims to boost investments in green projects and assets, presenting best practices gleaned from the sustainability strategy of banks in the country. These recommendations directly address the challenges banks face when evaluating projects for green credits.
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