22.01.2021

Peru banks on sustainability for the finance sector

Landscape

The Peruvian Ministry of Environment adopts ‘Green Protocol’ for financing investment in sustainable projects. Photo: Minam

Peru has laid the foundations for greater sustainability in its finance sector. In late 2020, the Ministry of Environment and finance sector stakeholders jointly adopted a ‘Green Protocol’ (‘Protocolo Verde’), which aims to ensure that priority is given to investments in ecologically sustainable projects in the future.

Signatories of the Protocol include the country’s most important credit and funding institutions, such as the Peruvian banking association (asbanc), savings bank association (Fepmaq) and association of microfinancing institutions (Asomif). This voluntary agreement was achieved with the support of the IKI project ‘Green Economy Transformation in Cooperation with the Partnership for Action on Green Economy (PAGE) – Synergies between Low-carbon Pathways and Sustainable Development Goals (SDG)’ – a project that is being implemented by GIZ. The Protocol is primarily aimed at creating space for cooperative ventures between the public and private sector, and to lead to the application of sustainability criteria for all projects and investments made.

A ‘Green Protocol’ with three pillars

The ‘Green Protocol’ is based on three strategic pillars that facilitate the application of ecological sustainability criteria by participating financial institutions. One pillar is formed by risk management, which integrates socio-ecological and climate risks into credit and investment appraisals. Making up a second component is the ‘greenification’ of portfolios, and the design of green finance products and services. The third pillar aims to establish ecoefficiency – i.e. the relationship between cost-effectiveness and environmental impact – as part of institutional operational management, so as to reduce the negative impacts of business activities on the environment. Accounting for sustainability criteria as part of these three pillars promote investments in green technologies , thereby achieving the tighter integration of sustainability as part of the economy.

The Protocol also aims to establish governance structures that will safeguard the implementation of the agreed targets over the long term. The ‘Green Protocol’ is an integral part of Peru’s ‘National Plan for Competitiveness and Productivity’, which was adopted in 2019. The sustainability measures in the finance sector form part of Peru’s efforts to fulfil its Nationally Determined Contributions (NDCs) for the Paris Agreement and therefore help achieve climate change mitigation worldwide. The targeted financing of low-carbon investments is considered an important milestone when transitioning to a sustainable economy and achieving the necessary reductions in greenhouse gases.