Colombia needs to improve scaling up green and climate-aligned finance to meet its climate goals. Currently, only 2.4% of financial portfolios are classified as green, and less than 3% target biodiversity. At the same time, Colombia’s financial system needs to better quantify and integrate climate risks into into financial regulation and institutional practices.

 

The financial sector also needs improvements in adoption of green standards, institutional capacity, more data on climate and nature risks, and reduce the high perceived risks of financing green projects. These challenges are compounded by macroeconomic and fiscal pressures, high international interest rates, and Colombia’s elevated country risk premium, which together increase the cost of funding and slow the flow of private and public capital into sustainable investments. 

 

This presents an urgent need to strengthen the technical capacity of regulators and financial institutions, align domestic practices with international standards such as IFRS S1/S2 and TNFD, and create financial mechanisms that reduce risk perceptions while increasing inclusion for Small and Medium-sized Enterprises (SMEs), women, rural communities, and other vulnerable groups. 

 

 

This project strengthens Colombia’s financial system to accelerate green and climate-aligned finance flows. It works along two complementary workstreams: regulatory development and institutional implementation. On the regulatory side, the project will deliver a climate and nature “stress test” to quantify sectoral exposure, provide a roadmap for regulatory alignment with international standards, and prepare technical guidelines on IFRS, TNFD, and climate risk management. On the implementation side, the project will develop a training programme and technical manual for banks, insurers, and microfinance institutions to integrate Environmental and Social Risk Management Systems (SARAS/ESMS).

 

It will also provide technical assistance to the National Guarantee Fund (Fondo Nacional de Garantías in Spanish) to expand its ESMS and create Clima PYME, a climate-risk guarantee mechanism to support Small and Medium-sized Enterprises (SMEs), and promote financial inclusion. These actions aim to reduce systemic climate and nature-related risks, mobilise private and public capital, and close the green finance gap, positioning Colombia as a regional leader in sustainable finance