Chile needs US$50 billion in investment over 30 years to meet international climate commitments

RIO DE JANEIRO, BRAZIL – “We need an investment of US$50 billion over 30 years to meet our international commitments on climate change; specifically, its NDCs (Nationally Determined Contributions) to reduce greenhouse gas emissions and achieve carbon neutrality by 2050″. It is one of Chile’s challenges that will be addressed by the new Green Finance Office of the Ministry of Finance, according to Cristóbal Gamboni, who heads it.

Internally, they call the premiere of this department a “formalization” of a work that had been developing in the portfolio since several administrations ago. It starts with relevant information and data on the table, such as the amount required to advance in the zero-emission goals.

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Two years ago, they started a pilot program together with the Dipres and the UNDP to identify what part of public spending is being allocated to combating climate change. “Today we can say that at least 0.16% of GDP was spent on programs related to climate change in 2020”, says Gamboni, who specifies that this figure is a floor, “because it does not take into account spending by municipalities, universities, and state companies, among others”.

Likewise, the new office handles data obtained from the national investment system, according to which there are currently at least 217 projects linked to climate change. “We already have some figures available, but we have to continue working on that; we have to make a complete sweep of this type of things and cover more than what the budget law has as coverage, to be able to see what is the real change that the government is making in this matter”, says Gamboni.

In this respect, he also specifies that they have “several initiatives to improve the quality of the information for decision making”, counting in addition to the work with the UNDP, participation in the natural capital committee, which is led by the Ministry of the Environment and in which the Central Bank will also participate.

Also integrated by economists Daniela Buchuk and María Paz González, the Green Finance Office will be in charge of channeling investments towards green assets. “Now that the situation is becoming unsustainable, many countries that grew by polluting a lot now realize that this is not a growth model that can be sustained in the long term and want to redirect many of their resources to green initiatives and measures against climate change. So there is a lot of financial flow going around, says the man who will lead the department.

“There is a great need to promote green projects and a responsible investment, known as ESG (environmental, social, and government). So there is a need to raise financing, and there are resources from governments, private and multilateral organizations,” he adds.

The objectives also include promoting national financial innovation that supports the country’s path towards sustainable development and supporting the Ministry of Finance in relations with international organizations and agencies in sustainable development and climate finance.

In fact, regarding that last point, it is worth noting that the office will be included within the portfolio’s International Finance Coordination, together with the Sovereign Wealth Funds Unit and the Public Debt Office, created in 2014.

“The international affairs area has been very active in the coordination work with other countries and multilateral organizations, for example leading a platform against climate change at the IDB, participating in meetings to join criteria based on the agreement to article 6 of the Paris agreement and also participating in commissions of South American governments to work on intergovernmental coordination and thus also to be able to raise sources of financing”, says Gamboni.

Likewise, international relations will be fundamental for developing a green taxonomy, that is, a common language so that the financial sector can establish what is or is not a green project. “Other countries have made progress in this area, but there is no standard taxonomy, so a lot of work with other countries is to exchange experiences and information,” he says.

Another objective of the department will be to advise other state administration bodies on sustainable development and climate finance, mitigation and adaptation instruments for climate change, and other issues related to sustainable finance.

Part of this work, according to Gamboni, includes “defining the characteristics that a program must have to be classified as a climate investment, establishing criteria that will operate throughout the public sector, to broaden the coverage of the pilot program we have to identify spending in this area”.

The ringleader of this task does not hesitate to recognize that the creation of the Green Finance Office is the result of work to which several administrations have contributed and which was given continuity during the second term of Sebastián Piñera.

“Chile’s Ministry of Finance has already shown a commitment to sustainable finance in this, in a work of many governments. It has worked on aspects such as the public-private green finance roundtable, participating in the board of directors in allocating green funds, and, most recently, a green bond issue was made. In this, we were pioneers in the continent, and we have already issued US$7.7 billion, and more will be issued this year”, says Gamboni.

Because of the diversity of tasks related to climate change, the Ministry of Finance had been dealing with for some time that the need arose for “a structure so that everything could be channeled and dealt with in an orderly manner”.

In this context, although the office’s opening takes place when the government is on its way out, he considers that it can be a contribution to the transition. “The fact that we have formalized this office will facilitate the handover of all the work we have been carrying out,” he says.