Climate Risk and Financial Systems of Latin America: Regulatory, Supervisory and Industry Practices in the Region and Beyond

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Monnin, Pierre;
Nakano, Chiemi;
Gallardo, Matías
Dec 2019
In Latin America and the Caribbean (LAC), regional supervisors and regulators have not yet explicitly included nor addressed climate-related risks in binding regulations and/or supervisory measures for the financial sector. This implies significant work ahead for the LAC financial sector to develop effective and complete frameworks to identify, assess, manage and disclose these risks within existing supervisory and regulatory frameworks in the region. At the same time, a lack of clarity prevails on both the taxonomy of such risks and the tools needed to manage them. In this context, the Inter-American Development Bank (IDB) launched a research program on the relationship between climate change and financial markets in the LAC region, beginning a dialogue with several regulators, central banks and supervisors, alongside an analytical effort that is presented here, in two parts: A Map of Financial Regulations and Industry Practices in Latin America; and an Analysis of International Practices in Using Supervisory and Regulatory Instruments, considering their replication potential in LAC.