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Regulatory Initiatives for Sustainable Finance in Costa Rica

3.1 Regulatory Initiatives aimed at driving ESG integration in the financial sector

In 2019, regulators convened a series of sustainable finance-themed roundtables to bring together financial industry participants. The Superintendencia General de Entidades Financieras (SUGEF) and the Superintendencia de Seguros Generales de Costa Rica (SUGESE), along with the Ministry of Environment and Energy (MINAE), collaborated on this initiative. This effort was supported by the Acción Clima program of the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ).

3.1.1 ESG Focused Regulation for Lending Institutions

The banking regulator, SUGEF, is drafting a “Regulation for the management of environmental and social risks, and climate-related risks in the loan portfolio.” The objective of this regulation will be to integrate climate risks into the formal risk management framework and governance of supervised financial intermediaries (i.e., banks). As of March 2021, the timeline to adopt this regulation has been delayed due to the adoption of new laws linked to Costa Rica’s accession process to the OECD and the Covid-19 emergency.

3.1.2 ESG Focused Regulation for Institutional Investors

Costa Rica does not have regulation requiring asset owners or asset managers to disclose how they incorporate ESG factors across their portfolios. However, in November 2020, securities regulation CNS 1620/11 was amended to place a set of requirements for investment funds to be designated as sustainable. Issuers who wish to label credit products as “green,” “social,” or “sustainable” must obtain a third-party review from verifiers approved by the Climate Bonds Initiative or SUGEVAL.

3.2 Voluntary and Industry Initiatives

Financial industry participants have adopted various measures to drive the adoption of sustainable finance in Costa Rica. In 2019, a green protocol was adopted in the banking sector. Furthermore, the Costa Rican stock exchange created voluntary guidance for sustainability reporting and a green bond standard.

3.2.1 ESG Initiatives Focusing on Lending Institutions

The 2019 roundtables on climate risk in the financial sector culminated in the launch of a green protocol for the banking sector (Protocolo Verde para la Banca). The Chamber of Banks and other Financial Institutions spearheaded the development of this voluntary initiative. It was adopted in October 2019 and signed by eight financial institutions along with SUGEF, SUGESE, and MINAE as “honour witnesses.”