Aligning financial flows of the financial sector in Costa Rica with the Paris Agreement climate change goals

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Aligning financial flows of the financial sector in Costa Rica with the Paris Agreement climate change goals

With these long-term commitments, the government is aiming to align financial flows consistent with the country’s NDC and NDP goals. However, financial sector actors are in an incipient stage of integrating climate change and broader sustainability concerns into their investment decisions and portfolio allocations because they have not engaged in the climate finance mobilization. There is a lack of regarding climate finance mobilization and how the private sector can engage in sustainable investments or economic activities, that are science-based and consistent with a net-zero economy by 2050. At the same time, the financial sector is exposed to climate risks (physical risks), especially via credit operations and increasing insurance claims. Also, decarbonization commitments result in additional legal and regulatory frameworks, which are likely to change the outlook of investments threatening companies that are not prepared to transition to a net-zero economy (transition risks).

The proposal will work with relevant financial actors; the main beneficiaries are the regulators and supervisors such as the BCCR, SUGEF, and SUGESE which are already involved and fully working on climate financial flows and climate risks. The private financial actors such as the banking association (ABC) and the insurance association (AAP) have a prominent role by using the methodologies and tools. Overall, this proposal focuses on the financial sector due to its fundamental role in financial intermediation and investment in climate change, and its contribution to the macroeconomic and financial stability.

Cover date 18 August 2022
Document type Approved readiness proposal
Organisation
United Nations Environment Programme
Country
Costa Rica