6 November 2025
Author: Guillermo Martinez
Over the past months, Latin America has seen a shift in how climate and nature finance are approached. The focus is moving closer to home: countries are aligning global climate goals with national priorities and developing financial solutions that respond to their economic, social, and ecological contexts.
This trend is increasingly visible in convenings across the region. From the UN Biodiversity Conference (COP16) in Cali last year, to this year’s Climate Action Week Mexico (CAWMX) in Mexico City, and looking ahead to COP30 in Belém, Latin America is taking ownership of its climate and nature finance agenda.
In line with this momentum, Climate Policy Initiative (CPI) organized the session “Scaling Investment in Climate and Nature” during Climate Action Week Mexico, in collaboration with the Embassy of Australia in Mexico and LatImpacto. The event gathered development banks, impact investors, and policymakers to explore how innovative financial mechanisms can bridge existing investment gaps.
The session built on CPI’s broader regional work through:
- The Global Innovation Lab for Climate Finance (The Lab), the Catalytic Climate Finance Facility (CC Facility), and the FiCS Lab, launched with Finance in Common (FiCS) and the Inter-American Development Bank (IDB). Each supporting the design and implementation of financial instruments that mobilize capital for climate and nature outcomes.
- The ClimateShot Investor Coalition (CLIC), a program that helps small and medium-sized enterprises (SMEs) in sustainable agrifood systems access blended and impact finance.
The first part of the session provided a data-driven overview of climate and nature finance trends in Latin America and the Caribbean (LAC). According to CPI’s Global Landscape of Climate Finance, the region receives only 6% of global flows, and 87% of this funding targets climate mitigation solutions, despite being one of the most climate-vulnerable regions in the world, critically requiring investments in resilience-building and climate adaptation.
Financial flows also remain concentrated in the energy sector, even though over half of regional emissions come from agriculture, forestry, and land use (AFOLU) sectors, areas with strong potential for mitigation and adaptation.
At the same time, domestic capital now represents over 50% of total climate finance in LAC, positioning national development banks and local investors as crucial anchors of the regional ecosystem. Strengthening their role is key to aligning global commitments with local investment realities.
From the panel held during the event, four key insights emerged from participants’ experiences implementing financial instruments in the region:
- The need to design investment vehicles that blend public and private capital effectively.
Blended finance remains a critical tool for reconciling risk and returns expectations. Particularly in sectors like agriculture and biodiversity, where long payback periods can deter private investors. Participants emphasized that catalytic resources should absorb early-stage risks and finance feasibility work, paving the way for commercial investors to enter at a later stage. The experience of initiatives such as The Yield Lab, which supports agri-tech SMEs, shows the value of pairing concessional finance with technical assistance from the earliest stages, allowing financial structures to combine impact goals with clear implementation pathways. - The importance of collaboration between financial and real-economy actors.
Financing alone cannot drive transformation. Early engagement with commodity buyers, supply-chain anchors, and technical partners helps ensure that financial mechanisms align with market dynamics and generate real demand from producers and buyers. Participants emphasized that “closing the loop” across the ecosystem, where project developers, investors, and end users operate in sync, is essential to scaling climate-smart agriculture, circular bioeconomy models, and restoration initiatives in the region. - The role of domestic institutions as anchors of regional climate finance.
Public development banks, such as Mexico´s Nacional Financiera (NAFIN), play a central role in channeling capital toward sustainable sectors. By integrating environmental risk management and sustainability criteria into their lending operations, these institutions enhance credibility, governance, and continuity, key factors for attracting both domestic and international investment . Their leadership reflects a broader shift toward regionally driven financial solutions. - Healthy enabling environments supported through taxonomies and thematic debt markets. Clear regulatory and market frameworks are critical to scaling climate and nature finance in the region. Mexico offers a strong example: in 2023, the country published its Sustainable Finance Taxonomy, becoming one of the first nations in the region to establish a national framework that classifies economic activities according to environmental and social objectives. Similar efforts are underway across Latin America, with Colombia’s taxonomy also published, and Chile and Brazil advancing their own frameworks. Organizations such as the Global Green Growth Institute (GGGI) have supported these efforts in several countries, helping create clearer investment criteria that reduce transaction costs, lower barriers to entry, and enable investors to better assess risk, eligibility, and impact. In parallel, the continued growth of thematic bond markets has provided institutional investors with familiar and liquid instruments to channel capital toward climate and nature outcomes. Mexico has also been an active participant in this market. The country launched its Sustainable Sovereign Bond Framework in 2020, paving the way for green, social, and sustainable bond issuances tied to fiscal expenditures. Institutions such as Crédit Agricole, a leading global underwriter and structurer of green and sustainability-linked bonds, have supported issuers across Latin America and Mexico in developing credible frameworks and broaden their investor base.
Together, these efforts are contributing to a more transparent and predictable enabling environment, one in which national policy leadership and capital market innovation reinforce each other to accelerate investment at scale.
At CPI, we view this evolving ecosystem as a reflection of Latin America’s growing capacity to advance climate and nature finance through innovation and collaboration. Through initiatives such as the Lab, the CC Facility, the FiCS Lab, and CLIC, we work with partners to test, refine, and scale financial mechanisms that transform ambition into investable action.
As the region moves toward COP30, one message from Mexico City stands out: Latin America is positioned to lead not only through ideas but through instruments, turning financial innovation into tangible progress for people, nature, and the climate.