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  1. Analysis
September 29, 2022

Case Study: Promoting green finance to foster sustainable development in Argentina

By Zoya Malik

Since 2021, the SMS Latinoamérica Sustainability team has been promoting the UK PACT-funded project “Promoting Green Finance to Foster Sustainable Development” in Argentina.

The goal of this initiative is for local banks to generate new financing sources for sustainable projects in order to help mitigate climate change and improve the situation of vulnerable groups. The challenge of the project is to promote a long-term turning point in local financing institutions towards activities with positive environmental and social impact.

In the first stage, during the year 2021, the project was promoted in the following Argentine provinces: Misiones, Corrientes, Chaco and Formosa. Later, La Rioja and Entre Ríos were added. In the second stage, during 2022, Mendoza and Neuquén also joined the project. Different organisations and local actors in each province take part in an articulated way and with expected roles for each one of them.

The actors involved

Financial Entities: The project offers technical assistance to Banks to develop Sustainable Finance. The current situation and the portfolio of the entities are evaluated in order to develop new sustainable financial products that allow for a greater flow of long-term financing aimed at mitigating climate change.

Local Actors: A mapping of sustainable investment opportunities in local economic sectors is carried out. Together with the team of participating banks, personalised interviews are being conducted with key officials, relevant associations, leading companies, cooperatives, representatives of the academic sector and civil society to identify the models and practices of positive environmental and social impact, as well as the investments required.

Entrepreneurs and Producers: Financial education and inclusion initiatives are being developed for groups of producers and female entrepreneurs. A strategy and dialogue are also being developed between the producers and entrepreneurs who lead sustainable models and the banks that participate.

Participants in this project

SMS Sustainability, is the organisation that is executing the project. Julián Costábile, Partner of Sustainability at SMS Latinoamérica commented, “We confirm that banks are key agents, with the capacity to finance this type of investment required to make each province’s economy more sustainable. On the other hand, specific tools must be developed; this is not a matter of good will; banks need to classify in their lines when a credit is green and when it is not, and they have to rely on very clear guidelines.”

Green Recovery Challenge Fund – UK Pact is funding the initiative. The project is supported by UK’s capacity development programme under the portfolio of International Climate Finance (International Climate Finance – ICF). “We are very pleased with the first phase of this project and I am glad that with the extension, the project will continue its high-impact work, expanding its reach to new regions, while providing valuable technical assistance to local banks in the regions where the first phase was carried out,” stated Beth Child, Deputy Director, Foreign, Commonwealth and Development Office and head of the UK Partnering for accelerated Climate Transitions (UK PACT) programme in the UK Government .

Financial entities participating in the project: Banco Nación, Banco Formosa, Banco Macro, Banco Corrientes, Banco Rioja and the Asociación Civil Sumatoria. “Working with the consultant (SMS) has been and continues to be extremely beneficial to us. It is highly productive because we incorporate new tools, receive recommendations and elements of analysis that we find extremely useful”, concluded Alejandro Rey, Departmental Assistant Manager of Investment Banking and Finance of Banco Nación.

Results

  • We discovered a large number and diversity of investment opportunities for projects with a social or environmental impact that do not currently have financing.
  • Agriculture, Construction, Forestry and Renewable Energies are the industries with the most investment opportunities
  • Of the total investment opportunities identified, 13% correspond to models led by women and/or have a gender focus, while 56% are models that favour the inclusion of vulnerable producers.

The project will be strengthened and expanded in the remaining months of 2022. Green and sustainable finance will continue to be promoted in the provinces that participated in the first phase of the project, with advisory services and additional technical support. Furthermore, work will begin with the identification of new sustainable investment opportunities in the Cuyo and Patagonia regions, with the addition of the Mendoza and Neuquén provinces.

On the other hand, the support of high-impact sustainable business models for climate change mitigation and adaptation, as well as poverty reduction, will continue.

The goal will be to become Change Educators. As key social actors, the project will spread knowledge in training sessions addressed to already participating financial institutions and other sessions open to the community with the purpose of promoting financial inclusion.

Conclusion

The SMS Latinoamérica Sustainability team, which promotes the project, believes that, given the socioeconomic conditions in Argentina and the investment and financing requirements for sustainable projects, it is critical to continue strengthening the ecosystem of Impact Finance. That is why, in 2022, we will continue working hard to build capacities in institutions, organisations and people in order to promote better sources of sustainable financing with a focus on climate change initiatives and the representation of women in projects.

This article first appeared in IAB’s ESG supplement, to view the full supplement please click here

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