Going beyond regulatory compliance: CAF on the way to becoming Latin American and the Caribbean’s environmental bank

Sergio Díaz-Granados, Executive President, CAF – Development Bank of Latin America

In its journey to become Latin America and the Caribbean’s environmental bank, CAF holds the historic mandate to drive the region’s sustainable development. Our Board has recently supported this commitment by passing a motion –ratified by its country shareholders– to approve the biggest capital expansion in our history, for USD 7 billion, which will enable the institution to double its portfolio by 2030.

"Applying environmental and social guidelines as the starting point for triggering positive economic and financial impacts on the wider economy"

A significant part of this capitalization will be used to boost and support the fair transition to a green, low-carbon economy, resilient to climate change. This entails reinforcing the environmental component of CAF’s transactions and strengthening resource mobilization towards green financing underpinned by inclusion and fairness. To this end, by 2026 we expect 40% of our transactions to be linked to  climate change mitigation and adaptation, focused on conserving biodiversity. This will have a positive impact that will go beyond merely complying with environmental and social safeguards and assessing climate risk.

With this policy, CAF fully commits to applying environmental and social guidelines as the starting point for triggering positive economic and financial impacts on the wider economy.

Our environmental and social safeguards set the optimal guidelines for the outcome of the financed initiatives, in terms of mitigating potentially negative environmental and social impacts. The preventive nature of environmental and social risks prioritizes the principle of “doing no harm“ to people and the surroundings; nevertheless, the scope of these safeguards is steadily becoming broader as it reorients project outcomes  to include achieving sustainable use of natural resources, ensuring the protection of biological diversity and natural habitats, as well as managing climate risk along with multi-dimensional metrics, encouraging the inclusion of components that guarantee co-benefits.

In the societal sphere, environmental and social safeguards are designed to protect people, particularly those in poverty or vulnerability, requiring that recognition and respect be given to ethnic groups, to their social organization, traditional skills and culture, their customary rights, human rights, rights over their territory and the natural resources they use, as well as guaranteeing the protection, conservation and attachment of value to their cultural heritage (both physical and intangible), inspiring safe and healthy working conditions.


Sergio Díaz-Granados, Executive President, CAF

In terms of gender, CAF’s policy seeks to tackle gender equality and the empowerment of women in Latin America and the Caribbean by cross-section implementation in the institution and in its projects , where the gender approach is fully integrated to prevent pre-existing gaps from getting wider and the occurrence of adverse impacts.

Apart from the fact that the safeguards are a pre-requisite in order to access CAF financing resources, their success in the field focuses on effective community participation, based on creating public awareness of information about the project and consulting with local communities on the issues that directly affect them. It is fundamental to understand the perception of impact on the potentially affected parties and stakeholder sectors to provide appropriate feedback for the project design and for their environmental and social management to address these concerns.

A factor that helps the safeguards to be applied in CAF is that we understand and have in-depth knowledge of the applicable environmental and social regulations, and the response capabilities in each country. Over the foundations of this understanding of the gaps between the local regulations and the safeguards, we can adapt the “obligatory compliance” approach that can be applied and tackle the need for advice and/or technical assistance that borrowers may require to ensure a truly positive impact on their transactions.

To this end, at CAF we are aware that this will mean that our technical assistance provision must be intensified to help the countries in the region, for which reason we have taken on the commitment to support them in the development and execution of projects that are environmentally and socially sustainable.