From floods to landslides, climate change is significantly disrupting markets across Latin America. Finance leaders know that they need to prepare for climate-related risks — and seize related business opportunities — but many lack the requisite knowledge. IFC is working to change this through the IFC-Green Banking Academy, a pioneering knowledge and capacity building program that provides banking professionals across Latin America and the Caribbean with skills and training on the fast-emerging area of green finance.

Climate finance is very important to Efrain Forero, president of Davivienda bank, Colombia’s second-largest bank. “It is my responsibility to ensure that Davivienda will become a sustainable bank,” he said, following his completion of IFC-Green Banking Academy training in 2019.

Forero took an eight-week IFC-Green Banking Academy course relating to green finance. In addition, he and two senior colleagues received scholarships for a one-week intensive program, which included customized workshops and roundtables with other CEOs on how to enhance green banking practices to benefit shareholders, regulators, and customers.

Championing green banking is a natural extension of IFC and Davivienda bank’s more than 40-year partnership. IFC and Davivienda were instrumental in strengthening Colombia’s active participation in the Sustainable Banking Network, a voluntary community of banking associations and regulators from emerging markets committed to moving forward on sustainable finance. Colombia made a commitment to develop its sustainable finance system and has been doing so since 2012, currently in an advanced stage, according to the Sustainable Banking Network progression matrix. In addition, the country has also set the goal of significantly reducing its greenhouse gas emissions by 2030 through the Nationally Determined Contributions.

Since its launch in November 2018, the IFC-Green Banking Academy has facilitated 400 program scholarships for bankers from 60 financial institutions in eight countries, with funding provided by the German government’s International Climate Initiative. Over 5,000 financial professionals across Latin America’s commercial banking sector have been trained through the IFC-Green Banking Academy Webinar Series. Additional requests for trainings extend from as far as Asia.

The IFC-Green Banking Academy has partnered with various international and academic institutions from across Latin America and Europe, including Beel Infrastructure Partners, IDOM, the Latin American Federation of Banks, Management Solutions, Pontifical Xavierian University, and the Renewables Academy, to develop specialized academic programs for the banking sector.

The IFC-Green Banking Academy aspires to put leaders in banking at the heart of its curriculum and to position climate change as a significant business opportunity for the financial sector. In a post-COVID-19 world, the IFC-Green Banking Academy’s approach is especially relevant, as governments and investors need to better integrate climate risks into their planning.

Having completed his IFC-Green Banking Academy training, Forero is even more committed to championing green banking in Colombia: “The knowledge we received will make Davivienda a better institution, make us more competitive in the future, and more attractive for our investors and our clients,” he said.

Prompting Growth in the Green-Loan Market

The green loan is a fast emerging tool whose proceeds can be used by corporate borrowers to finance or refinance eligible assets or activities that improve the sustainability of their operations.

In 2019, IFC became the first global development institution to offer its investment clients the option of structuring loans in accordance with the Green Loan Principles. These principles, modeled on the Green Bond Principles, specify how loan proceeds should be used and how projects should be selected in order to qualify for green-loan status. This ‘green-loan’ label can help businesses attract additional financing and align their sustainability and funding strategies.

IFC is encouraging its clients to use green loans to mitigate the adverse impacts of climate change and encourage low-carbon development. We are supporting our clients’ efforts to meet the requirements of the Green Loan Principles, such as establishing a management system to track, manage, and report on the use of proceeds of a loan for dedicated green projects and have it verified by a third party.

Developing countries accounted for just $1.6 billion of the estimated $33 billion in outstanding green loans as of 2019. But the market is expected to grow rapidly and may even outpace the growth of the green-bond market in the near term.

IFC is a leading provider of climate-related financing. We were one the earliest issuers of green bonds, launching a Green Bond Program in 2010 to unlock investment for private sector projects that support renewable energy and energy efficiency. To date, IFC has more than issued more than $10 billion across 172 bonds in 20 currencies.