Latin America is a special region when it comes to climate change. According to a report by the consulting firm McKinsey, the region has abundant resources of key minerals for the energy transition (with lithium and copper leading the way), a great potential for generating renewable energy and producing liquid biofuels, forests (the region represents 34% of the world's potential for mitigating the effects of climate change through reforestation), and forests (the region represents 34% of the world's potential for mitigating the effects of climate change through reforestation). and an agricultural, livestock and fisheries sector with ample possibilities for investment in sustainable production.

McKinsey estimates that to achieve its zero emissions goals by 2050, Latin America will require investments in the order of US$700 billion per year.. The region also offers investment opportunities in the area of reforestation for some US$150 billion, in renewable energies for US$250 billion, and in agriculture, livestock and fisheries for US$200 billion.

Latin America is, at the same time, one of the regions most exposed to the risks of climate change. According to McKinsey, the region is home to 13 of the 50 countries most susceptible to climate-related shocks, which could push up to almost 6 million people into poverty. Biodiversity loss, meanwhile, could affect agricultural production and food security in the region.

In this environment, the financial sector has significant challenges and opportunities. Many regulators, including the Financial Market Commission in Chile, the Central Bank and National Monetary Council in Brazil, and the Ministry of Finance and Public Credit in Mexico have issued measures for the adoption of criteria and disclosure of actions that publicly traded companies are taking with respect to climate change. and the Mexican Ministry of Finance and Public Credit have issued measures for the adoption of criteria and disclosure of the actions that publicly traded companies are taking with respect to climate change.

This is directly related to the opportunities for the financial sector to channel financing for the investments needed for climate change-related projects, with the development of instruments such as green bonds, which more than doubled in less than two years, reaching US$30.2 billion in 2021.

In parallel, the financial sector will face the challenge of measuring the risks of companies and their physical assets in the face of climate change and developing and monitoring key performance indicators in areas related to decarbonization and the sustainability of the investments and companies they finance with these instruments.

You can see the full report here