Green Financial Regulatory Policy for Latin America in the Aftermath of COVID-19

For over a year now, the COVID-19 pandemic has strained governments, economies and public health to within breaking point. In South America alone, there have been over 25 million recorded cases of COVID-19 and 679,376 deaths, with an outbreak in Brazil that is the third largest in the world. Amid this great human and economic suffering, Latin America also faces substantial risk of economic shock and exposure to socio-environmental conflicts, climate emergencies and long-term climate change.

How can Latin America best recover from the COVID-19 pandemic and address systemic weaknesses in the financial regulatory sector? What policy tools are available for financial regulators? How can climate risks be incorporated into Latin America’s financial regulatory policy moving forward?

In the fall of 2020, the Boston University Global Development Policy Center convened a Working Group of Latin American bank regulators, development bankers and related experts to review the financial regulatory policy toolbox available to regulators and map a way forward. A new report written by GDP Center Distinguished Scholar Daniel Schydlowsky summarizes the Working Group’s discussions and recommendations to green Latin America’s financial and regulatory policy in the aftermath of COVID-19.

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At the same time, the ESRM system should be supported by other regulatory policy instruments specific to addressing particular climate risks. This is important for the short, medium and long-term environmental and climate policies, as well as policies concerned with responding to natural disasters. Recovering from the COVID-19 pandemic will also require designing specific policies that take into account the particular economic circumstances created by the pandemic.

Put together, the adoption of an ESRM system and targeted policy instruments would cumulate in financial regulation policies that can ensure the long-term soundness of the financial system and also contribute to the sustained evolution of the economy on a path more consistent with environmental requirements and climate change.

This research has been funded by the International Network for Sustainable Financial Policy Insights, Research and Exchange (INSPIRE). INSPIRE is a global research stakeholder of the Network for Greening the Financial System (NGFS); it is philanthropically funded through the ClimateWorks Foundation and co-hosted by ClimateWorks and the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.