Case study: Building a green financial ecosystem in Peru

Case study: Building a green financial ecosystem in Peru. Peru's transition to a new global economy low carbon economy depends to a large extent on the ability of the financial system to mobilizing private capital on a large scale. In order to meet its national climate goals (NDCs) to 2030, the country needs to mobilize more than $50 billion, which is evidence that the green financial market in Peru is still at an incipient stage.

As of 2023, only a small number of financial institutions were offering products with specific environmental criteria, which limits the speed and scale of the climate action from the financial sector. This case study, prepared by LACADI - Latin American Climate Assets Disclosure Initiative, analyzes the process of incorporating green financial instruments in the Peruvian financial system, with an emphasis on the green credits, from the review of regulatory frameworks and interviews with key players such as banks, microfinance institutions and articulating institutions.

The analysis shows a clear differentiation between the approaches of climate change mitigation and adaptation. The multiple banking concentrates its strategy on sophisticated financial instruments, as the sustainable bonds, and in large volumes of financing. In the retail segment, there is a predominance of mitigation products with rate incentives, as the green mortgage loans.

For their part, the cajas and microfinance companies leading the way in the development of products oriented to the adaptation, especially for the agricultural and microenterprise sector, with solutions such as solar technologies o rural biodigesters. The scaling of these products depends on the blended finance and of strategic alliances with international cooperation agencies and technology providers.

The study identifies structural, operational and governance barriers that affect the actors in the system in a differentiated manner. These include the absence of a national green taxonomy, which generates regulatory uncertainty, the institutional inertia and lack of leadership from top management, the end customer resistance of the economic benefits of green products and the benefits of green products. high operational and logistical costs, especially relevant for the microfinance segment.

Despite these barriers, the following have been identified key success factors that allow progress to be made in the development of the green financing. These include the alignment of economic incentives for commercial teams, the operational expertise through roles dedicated to the prospecting and structuring of bankable green projects, and the construction of strategic alliances that facilitate access to preferred stock y technical assistance.

The study concludes that the scaling up of the green financial ecosystem in Peru requires a coordinated action from the highest level. This implies the implementation of a green taxonomy by the public entities, a greater public-private articulation to reduce costs and risks, the active leadership of boards of directors and general management in banks and microfinance institutions, the simplification of the offer of green financial products and the diversification of funding sources through innovative instruments.

Overall, the green financial ecosystem in Peru has a solid strategic foundation, but still faces a slow pace of capital mobilization. The regulation, the institutional leadership, the demonstration of profitability and the public-private partnership will play a key role in accelerating the transition to a more efficient resilient and low-carbon economy.