Tropical forest fragmented by oil palm plantations in Costa Rica. The new taxonomy categorises economic activity based on environmental criteria. © TR Shankar Raman
Costa Rica has unveiled its first green taxonomy, hoping to guide investors towards sustainable projects in a nation whose rich biodiversity is increasingly under threat.
Published last week, the taxonomy was jointly developed by the country’s financial regulators and environment ministry, with the support of the Banco Central de Costa Rica and finance ministry. The UN Environment Programme’s Finance Initiative (UNEP FI) coordinated the process.
“The Taxonomy aims to provide credibility, integrity, and transparency to the market,” the document reads.
Similarly to other taxonomies, Costa Rica’s is structured around technical criteria that help categorise economic activities according to the extent to which they help achieve seven identified national environmental objectives.
These include the mitigation of and adaptation to climate change, but also the sustainable use of water resources and the protection of biodiversity.
The latter is notably important in a small Central American nation that contains nearly six per cent of the world’s biodiversity, according to its government, despite accounting for only 0.03% of the Earth’s land surface. These ecosystems have been shifting rapidly due to climate change.
“In future stages, the Taxonomy may be updated to reflect the inclusion of new environmental and social objectives, sectors and economic activities,” the document notes.
Policymakers, regulators and supervisors are listed among the potential users of the taxonomy, in the process of designing standards for financial products, bond issuances and disclosure requirements.
It is also hoped that the taxonomy will help companies with transition planning and encourage the pursuit of green financing opportunities, while financial institutions can use it to help evaluate the environmental impact of credit or investment portfolios.
Costa Rica becomes the third Latin American economy to release a taxonomy, following Colombia in 2022 and Mexico in 2023.
Numerous others are in the works across the region, including in Brazil and Argentina, while a regional classification is being developed by the Central American Council of Supervisors of Banks, Insurance and Other Financial Institutions.
The UN Development Programme published a common framework for taxonomies across Latin America and the Caribbean last year, to encourage comparability between those springing up around the continent.
Costa Rica’s is intended to be interoperable with that of the EU, as well as those of Mexico and Colombia, to allow investors to better make comparisons across jurisdictions both regionally and worldwide.
This page was last updated August 23, 2024
Written by
Katy Lee has been a writer for Green Central Banking since early 2024, focused on our Asia coverage. A Paris-based journalist who has written for major international titles for more than a decade, she is the co-host of The Europeans, an award-winning podcast about Europe which often covers environmental issues.
