Financing of Circular Economy Investments

Published on Friday, 2 June 2023

We interviewed Carla Della Maggiora, Deputy Director of BASE, to learn about relevant points of the study "Financing CE Investments - Experience in Colombia" published by IDB-Invest and prepared in coordination with the Swiss Foundation BASE, analyzes the role of the financial system in the process of transition to circularity through Bancolombia, Banco de Bogotá and Bancólex in Colombia.

 Why is this work done for Colombia beneficial for other Latin American and Caribbean countries?

This document provides valuable information and tools that facilitate the participation of the financial system in the implementation of a circular economy. It also provides an updated view of Colombia’s circular economy. One of the most outstanding contributions is the "categorization system" it offers, which facilitates the identification of projects and determines whether they contribute to the transition to circularity; this system focuses primarily on the banking sector and provides practical tools for its application. It also establishes guidelines and defines relevant metrics following the criteria specified in the abovementioned categorization. In addition, tools are included to help promote credit programs. It is important to note that all the elements presented in this study are adaptable to any country in the region, which makes it broadly relevant and applicable at the regional level.

 What are the characteristics and elements of the categorization system presented there?

The development of the categorization system was based on the fundamental principles described below. First, the plan aligns with the country's reality and with Colombia's national circular economy strategy, as this allows for effective collaboration among the various actors, especially those responsible for defining policies. The participation of the financial sector and other actors in the ecosystem contributes to achieving the proposed objectives. In addition, the system uses international information related to a circular economy and good practices, especially those developed in Europe.

A circular economy is largely based on the value chain, aiming to maximize resource efficiency and minimize waste. It is important to note that these systems are dynamic and constantly evolving, adapting to new definitions and regulations related to a circular economy.

The categorization system identifies two types of crucial elements. Firstly, core elements determine whether a project contributes to a circular economy and include inclusion and exclusion filters. The project also recognizes the importance of a just and people-centered transition. Secondly, the complementary elements seek to generate transparency, divided into two aspects. One of them refers to an activity's gradualness and level of circularity. In contrast, the other refers to alignment with local policy to promote relevant projects that fulfill the established objectives.

What partnerships can result in Latin America and Caribbean with the information found in the report?

The system developed makes it possible to unify initiatives to facilitate their understanding by investors and stakeholders. In this sense, it makes it easier for everyone to "speak the same language," and there are no differences from one country to another, to develop partnerships and value chains better.

Link to download the study: