Financing Circular Economy Investments: Colombia’s Experience

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

1. Why is the work that was done for Colombia useful for other countries in the Latin American and Caribbean region?

This document provides valuable information and tools that facilitate the participation of the financial system in the implementation of the circular economy. It also provides an updated overview of the circular economy in Colombia. One of the most significant contributions is the introduction of a categorization system that facilitates the identification of projects and determines whether or not they contribute to the transition to circularity; this system focuses specifically on the banking sector and provides practical tools for its application. It also establishes guidelines and defines relevant metrics following the criteria established in the aforementioned 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 widely relevant and applicable at the regional level.

2. What are the characteristics and elements of the categorization system presented in the study?

The development of the categorization system was based on the following fundamental principles. First, the system was aligned with the country's current situation and with Colombia's national circular economy strategy, as this synergy 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 the achievement of the proposed objectives. In addition, international information related to the circular economy and best practices, especially those developed in Europe, was used.

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

The categorization system identifies two types of key elements. Firstly, core elements are identified which determine whether a project contributes to the circular economy and which include inclusion and exclusion filters. The importance of a just and people-centered transition is also recognized. Secondly, there are complementary elements which aim to provide transparency and are divided into two aspects. One of them refers to the phase and level of circularity of an activity, while the other refers to alignment with local policy, with the aim of promoting relevant projects that contribute to the fulfillment of the established objectives.

What synergies can be created as the knowledge included in the report spreads throughout the Latin American and Caribbean region?

This system allows the initiatives to be unified in order 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 between countries, so that better synergies and value chains can be developed.

Link to download the study (available in Spanish): https://idbinvest.org/en/publications/financing-circular-economy-investments-colombias-experience