As regions develop economically, the traditional focus on rapid industrial gains can often come at a cost to the wider environment. Overcoming the challenges this situation presents has become a leading priority for organisations and governments worldwide. Ever since its creation in 1960, the Central American Bank for Economic Integration (CABEI) has been committed to playing an active role in supporting development in the region while also helping countries adapt to and mitigate the effects of climate change.
Central American countries are particularly vulnerable to the effects of climate change. The region is marked by major environmental events, such as El Niño in the Pacific and an increasingly erratic hurricane season in the Caribbean. At the same time, a combination of environmental degradation and infrastructure problems can hamper disaster response, especially for remote and rural communities.
For decades, CABEI has promoted environmental sustainability while also helping communities become more resilient to a changing climate. The bank aims to ensure that efforts made in social development, competitiveness and integration also offer environmental viability in the medium- and long-term too. In the words of CABEI Executive Vice President, Alejandro Rodríguez Zamora: “The role of CABEI is crucial to promoting financial solutions for a climate-resilient future, while continuously pursuing poverty reduction, regional integration and economic and social development.”
CABEI: a regional leader on combatting climate change
In recent years, the effects of climate change have become more marked, and so in 2016, the bank’s Board of Governors issued a declaration to “Promote and Support Financing Actions for the Adaptation and Mitigation of Climate Change”. This declaration reaffirmed CABEI’s institutional leadership within the region to channel financial resources that help countries to face the challenges of climate change. This led to the launch of CABEI’s new Environmental and Social Strategy in December 2017.
This initiative is an essential part of the bank’s wide-ranging efforts that seek to optimise support for environmental, social, economic and cultural development. The strategy is based on the guiding principles of the CABEI Environmental and Social Policy, which conforms to the highest international standards of sustainable development financing, transparency, consultations and citizen participation.
In recognition of its leadership in this area, CABEI was recently admitted as an observer of the United Nations Framework Convention on Climate Change (UNFCCC). It has also been accredited as a regional entity of the Green Climate Fund (GCF) and the Climate Change Adaptation Fund (AF).
The opportunity to channel climate funds brings new challenges and benefits. For example, with CABEI’s accreditation to the GCF, the bank now has the capacity to support more large-scale projects (greater than $250m) and can access all the fund’s financial instruments such as loans, donations, equity participations and partial guarantees. It can also obtain financing from the GCF to carry out micro, small, medium and large projects.
What’s more, CABEI works closely with other strategic partners who have made financial and technical resources available to support public and private sector programs and projects that aid in climate change mitigation and adaptation. The bank is part of the International Development Finance Club (IDFC), which is an initiative that includes 23 national and sub-regional development banks. The members have agreed on key principles, including the generation of a joint methodology to measure each bank’s level of investment in actions that aim to limit the effects of climate change.
Besides providing funds, CABEI also holds an issuance position in the international markets of sustainable investment and is the first Central American issuer to place this type of bond. Green bonds represent a new funding source to reach investors committed to environmental sustainability and who identify with the bank’s commitment to this cause, as well as the nature of the development projects it finances. Its first issuance, of South African Rands ZAR1,032 ($72.9m) on Japan’s Uridashi market, came in July 2016.
The bank also has a pioneering role in financing its member countries to help them adopt mitigation and adaptation practices to climate change. This financing role includes the issuance of green bonds and accreditation to green funds. It also helps with the development of new strategic partnerships, which aim to increase the flow of financial resources to member countries that are facing climate change challenges and maintain sustainability in their development growth.
CABEI is a growing bank with an international outlook, new opportunities and horizons. Nevertheless, it remains committed to its roots in Central America with a redefined social and environmental strategy that is harmonised with the priorities of the Central American Integration System (SICA) agenda.