A report prepared by the UN Environment Inquiry in 2018 estimated that the need for sustainable financing in Argentina for the period 2019-2030 was at least US$51 billion per year. While the flow of sustainable finance in 2018 was approximately US$14.1 billion.
Mindful of these data, in 2020 the Technical Board for Sustainable Finance (MTFS – for its acronym in Spanish) was formed in Argentina, made up of the main entities of the public sector and coordinated by the Secretariat of International Economic and Financial Affairs of the Ministry of Economy of the Nation. Its objective is to "coordinate, design, evaluate and promote public policies, activities, economic and financial instruments that facilitate public and private investments towards initiatives that promote the development and strengthening of sustainable finance in our country".
Under this framework and to achieve the Sustainable Development Goals (SDG) of the 2030 Agenda of the United Nations Organization (UN), the adoption and implementation of the National Strategy of Sustainable Finance (ENFS – for its acronym in Spanish) was approved by Resolution No. 696/2023.
“Sustainability represents a renovating concept that day by day is taking greater preponderance in the consciousness of society and therefore also in investors. Sustainable finances were established as a result of the growing interest among financial system actors -public, mixed, and private- for environmental and social issues, such as climate, inclusion, diversity, and equity” comments Marcelo Pinto, Advisory Services Partner at Grant Thornton Argentina.
They are investment decisions that consider environmental, social and governance factors (ESG) and that contribute to achieving strong, sustainable, balanced and inclusive growth, directly and indirectly contributing to the SDGs.
They are the financing and the respective institutional and market arrangements that facilitate the country's sustainable development and generate a measurable economic, social and environmental impact.
The ENFS is a roadmap focused on generating the conditions to identify and mobilize in a scalable manner the necessary resources to attract public and private investments that contribute to achieving the objectives of the 2030 Agenda. In turn, it will allow the generation of a guide for managing climate-related financial risks.
The document proposes five main strategic axes that include financial and non-financial aspects to ensure a just transition towards compliance with the SDGs adapted to the reality and needs of the country:
1. Regulatory framework: seeks to deepen the ordering and development of local regulations leading to the development of sustainable finance in Argentina. The focus will be placed on financing for a transition to a low carbon economy.
2. Common language and taxonomy: establish criteria for the development of a common language and methodology for assessment and reporting. The application of the taxonomy should be done gradually to facilitate the adaptation of the processes and the use by the different actors.
3. Generation of information, transparency, reporting, indicators and data analysis: develop common evaluation, analysis, indicators and reporting methodologies to consolidate the market, incorporating the perspective of sustainability. At the same time, it proposes having reliable sources of ESG data to use as a basis for decision-making and setting objectives and actions.
4. Incentives: create opportunities and incentives to attract local and international funds to the sustainable finance market in Argentina.
5. Sustainable financial instruments: deepen the design and implementation of financial instruments and innovative projects developed by public and private entities in the local market to stimulate capital flows.
“A modern state cannot ignore the impact that macroeconomic and long-term decisions can have on these topics. In moments of difficulties and challenges like the one our country is going through, it is essential that the control panel of development indicators contemplate sustainability criteria, in line with the SDGs and the main global guidelines on the matter”, Pinto points out.
Different banking entities, organizations, international forums and stakeholders have analysed the risks and financial implications of ESG and have begun to outline alternatives and implementations to address them. In this sense, the ENFS will make it possible to begin the process of identifying risks related to climate change and to strengthen capacities so that both the public and private financial sectors increase their resilience and consolidate their contribution to sustainable finance in Argentina.
The first National Survey of Sustainable Finance and Climate Change, carried out to the banking sector by the Central Bank of the Argentine Republic (BCRA) on the last quarter of 2022, revealed that 74% of the surveyed institutions consider climate change as a source of financial risks for the entity and 65% as a potential source of risk to the stability of the financial system in Argentina.
In turn, 72% recognize that they still do not have a risk identification and management framework and 77% do not have specific criteria to identify and classify credit operations or productive projects that generate environmental benefits. The ENFS could be the basis on which these entities can design their strategies towards sustainable finance.
“It is an opportunity to ensure that the strategy for transferring resources to projects and initiatives is carried out considering not only economic objectives but also social and environmental ones, generating greater value, for example, in terms of regulations, information management, and reports. It is important that we commit ourselves as a country to actively participate at the forefront in addressing sustainability, with transparency and an ethical commitment”, concludes the expert about the National Strategy for Sustainable Finance.