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Colombia’s Financial Sector Engaged in Improving Forest Protection and Environmental Sustainability

Blog | Thu, 23 May, 2019 · 5 min read
Colombia’s Financial Sector Engaged in Improving Forest Protection and Environmental Sustainability

Colombia boasts 60 million hectares of natural forest, covering more than half of the country. It is the second most biologically diverse country in the world, home to about 10 percent of the world’s species. However, this rich biodiversity is threatened by deforestation caused predominantly by illegal mining and logging, agricultural conversion, coca plantations and forest fires.

The UN-REDD Programme has been working with the government of Colombia to reduce deforestation and forest degradation. Through UN-REDD Programme activities, stakeholders including indigenous peoples, Afro-Colombian communities, farmers, public institutions and the private sector have learned how REDD+ can support their empowerment by improving mechanisms that can assist in forest conservation while also improving their own livelihoods.

In 2018, UN Environment’s Finance Initiative (UNEP-FI) and the Ecobanking Project of INCAE Business School, in collaboration with the UN-REDD Programme and the Global Green Growth Institute, organized an introductory training workshop on environmental and social risk analysis. The goal of the event was to train those working in the finance industry how to identify, categorize and analyze environmental and social risks in lending operations and investment projects. For participants from FINAGRO and Banco Agrario, the training focused specifically on projects and lending operations in the agricultural sector.

“The workshop was part of a wider strategy to develop specific financial products and incentives targeted at the transition to more sustainable agricultural production models,” says Jacinto Coello, UN Environment Programme Officer. “The expectation is that banks in Colombia will adopt environmental and social risk management systems to screen the different financial transactions they undertake, and therefore, stop financing activities with severe negative environmental and social impacts. The goal for them is to finance activities like agroforestry that can support the transition to a low-emissions economy.”

According to Coello, there is also an increasing demand in Colombia for responsible banking products. This year, FINAGRO will start piloting the first agro-environmental line of credit as an incentive for sustainable livestock producers to protect forests and restore degraded livestock areas. This is one of the first steps in strengthening FINAGRO’s institutional capacities in developing and implementing environmental and social risk assessment policies.

“We have a great responsibility, and we are trying to coordinate actions so that Colombia has a responsible bank and the agricultural sector has an offer of financial products that promote beneficial changes for the environment,” says Nidyan Mireya Pinzón Ruiz, Advisor to the Presidency of FINAGRO . “Through lines of credit for working capital and investment offered by FINAGRO, it is possible for agricultural producers to finance activities beneficial to the environment, while also contributing to improving competitiveness and efficiency in their production.”