CONTEXT
Ecuador, nestled in the northwestern corner of South America, boasts incredible biodiversity and a diverse range of ecosystems, from the Amazon rainforest to the Andean highlands and the Pacific coastline. Over the past few decades, Ecuador has experienced noticeable shifts in its climate patterns, leading to a series of environmental challenges with profound implications for its people, ecosystems, and economy. The melting Andean glaciers, once a dependable freshwater source, are diminishing, posing a direct threat to water security in urban and rural areas. Coastal regions are at risk due to rising sea levels and intensified tropical storms, endangering human settlements, fisheries, and tourism. The Amazon rainforest, known as the “lungs of the Earth,” faces deforestation challenges heightened by human encroachment.
Acknowledging the interconnectedness of environmental sustainability and financial stability, there is a growing recognition that private financial institutions can act as catalysts for positive change. In this context, Asobanca, the Association of Private Banks of Ecuador, emerges as a pivotal force in driving investment towards climate action and resilience by scaling up green financing. As part of its actions for the management of climate change from the private financial sector, Asobanca promoted the signing of the Sustainable Finance Protocol, in November 2016. The signing of this protocol marked the beginning of the sustainable finance strategy in the private financial sector, positioning Ecuador as one of the six pioneering countries in Latin America to develop national criteria to support sustainable development in this area.
One of the many obstacles to expanding sustainable finance is a lack of clarity in definitions of what is understood and what qualifies as green. To address the need among financial market participants for clarity and transparency, Asobanca is spearheading the development of a green taxonomy for private financial institutions in Ecuador. This collective effort can lead to a broader impact on sustainable finance practices across the entire financial sector, amplifying the positive effects on the environment and societal well-being.
The Interamerican Development Bank (IDB) and its private arm IDB Invest, recognising the importance of categorisation frameworks to identify sustainable economic activities, have engaged BASE to provide this technical assistance for Asobanca and its affiliates.
The general objective of this project is to advance in the definition of a green taxonomy for the private banking sector in Ecuador and its application to potential investment projects. The specific objective is to adopt a green taxonomy for these types of investments, to establish clear eligibility criteria, and to evaluate key performance indicators (KPIs) to be included in the impact measurements of these investments.
This will be disseminated through capacity-building workshops that seek to unify language, the understanding of the taxonomy and its application through the development of an academic project for each participating bank, adhering to Asobanca’s Sustainable Finance workshops, according to the focus sectors of each entity and the priorities identified as part of this work.
The expected impact of this consultancy is to boost green finance in Ecuador, and to nurture the active involvement of financial institutions in the financing of green activities that contribute to the national environmentally sustainable development.
