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2° Investing Initiative works in emerging markets across the globe to help financial institutions and governments facilitate the low-carbon transition, as well as respond to climate-related risks.

Spanning all of 2DII’s research programs, our team of finance and climate experts leads capacity-building, climate risk assessment, policy analysis, and other initiatives across Latin America, Asia, and Africa. Our mission is to help close the gap in regions that are especially vulnerable to the physical and transition risks associated with climate change.

More about the program

Many emerging markets are at the front lines of climate change, but they lack the capacity and financing needed to speed up the energy transition. To help address this shortfall, 2DII has been expanding its work in emerging markets with an initial focus on Latin America. Thus far, we have led projects in Brazil, Chile, Colombia, Malaysia, Mexico, Nigeria, Peru, the Philippines, and South Africa, among other countries.

As part of these efforts, 2DII works in close collaboration with financial institutions, supervisors, regulators, NGOs, and trade associations in these regions, such as the Colombian Financial Superintendence (SFC), Asia Sustainable Finance Initiative (ASFI), and Mexican Pension Funds Association (AMAFORE). In addition, we partner with high-level international organizations such as the UN Environment Program Finance Initiative, UN PRI, and WWF.

2DII’s emerging markets work is led by Deputy Director Edgi De Los Santos Jiménez with support from 2DII experts based across Europe, North and South America.

Selection of case studies

Harnessing green finance through climate-related risk management and opportunities in Malaysia

As part of the £1.4 million UK PACT program by the UK government, 2DII is working with WWF-UK to promote green finance in Malaysia.

This project will contribute to Malaysia’s carbon emissions reduction by supporting investments in low-carbon sectors, building capacity of financial regulators and institutions, and strengthening the integration of climate-related risks and opportunities into policies, decision-making processes, and financial product innovations. As part of this project, 2DII and WWF-UK will work in close collaboration with the beneficiaries, the Bank Negara Malaysia and Joint Committee on Climate Change (co-chaired by the Bank Negara Malaysia and Securities Commission Malaysia).

UK Partnering for Accelerated Climate Transitions (UK PACT) is a program funded by the UK Government. It supports countries that strive to overcome barriers to clean growth and have high emissions reduction potential to accelerate their climate change mitigation efforts. Learn more about the project here.

Improving climate-related risk management in Brazil and Colombia

2DII is collaborating with the consultancy WayCarbon on capacity building for two Brazilian development banks, helping them improve the integration of climate change considerations into their decision-making and risk management processes.

As part of this project, 2DII will apply the PACTA climate scenario analysis methodology to the institutions’ lending portfolios, develop a climate risk assessment framework, and assist the banks with improving their internal climate risk management skills. This project is funded by the UK PACT Green Recovery Challenge Fund.

In addition to this initiative, 2DII is working with Universidad de Los Andes and Willis Towers Watson to help Colombian financial institutions and government agencies better understand and respond to climate-related risks. To this end, 2DII and its partners are devising a theoretical course for public officials and financial representatives. In addition, to better understand the status quo and progress in measuring climate-related risks in Colombia, 2DII will apply PACTA and run a climate stress-testing exercise on insurance companies’ portfolios. This project is financed by UK PACT Colombia.

Portfolio analysis and stress testing with the Chilean Financial Market Commissioner

A large part of 2DII’s emerging markets work involves applying the PACTA methodology and stress testing with supervisors, regulators, and industry associations around the globe, especially in Latin America.

In one of our newest projects in this area, 2DII will work with the Chilean Financial Market Commissioner (CMF) to pilot test climate scenario analysis and stress testing tools for financial supervision. The project’s aim is to help the CMF better understand the materiality of climate change risks for investments in the Chilean insurance sector. Operationally, 2DII will measure relevant insurance portfolios’ exposure to physical and/or transition risks, by implementing PACTA and climate stress exercises. The results of the analysis will be used to develop new supervisory tools. This project is funded by the Inter-American Development Bank.

In addition to this work, 2DII is carrying out portfolio assessment partnerships with the Colombian Insurers Federation (Fasecolda), Mexican Association of Financial Intermediaries (AMIB), Colombian Financial Superintendence (SFC) – Analysis of pension funds, Colombian Trust Association (Asofiduciaras), Mexican Pension Funds Association (Amafore), and Brazilian Superintendence of Complementary Welfare (PREVIC).

Funding information: This work receives funding from the International Climate Initiative of the German Ministry of Environment. The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) supports this initiative on the basis of a decision adopted by the German Bundestag. Other components of this program are funded by the Inter-American Development Bank, UK PACT Malaysia, the UK PACT Green Recovery Challenge Fund, and UK PACT Colombia. This work reflects 2DII’s views only, and the funders are not responsible for any use that may be made of the information it contains.

 

    

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