Colombia: Committed to Sustainable Development

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Content publication date

August 29, 2023
The National Government has set a roadmap to make Colombia a Power of Life, seeking comprehensive, sustainable, environmentally friendly, and community-friendly investments.

According to the United Nations Conference on Trade and Development (UNCTAD), there is currently a global annual deficit of $2.5 trillion to meet the 2030 Agenda and the Sustainable Development Goals (SDGs) in developing countries. The COVID-19 pandemic and other geopolitical and economic situations worldwide have exacerbated this situation. In this context, Foreign Direct Investment (FDI) plays a crucial role in financing and achieving sustainability goals at both local and international levels.

In the last decade, a new generation of investment policies has emerged, aiming for broader development while creating a favorable investment climate, as stated by UNCTAD. This new generation of policies focuses on inclusive growth and sustainable development to attract and benefit from investments.

Colombia has not been oblivious to this reality. The government of President Gustavo Petro has set a roadmap to make Colombia a Power of Life, seeking comprehensive, sustainable, environmentally friendly, and community-friendly development. The influx of foreign direct investment is a fundamental pillar, contributing with knowledge transfer, capital, and projects that enhance the country's competitiveness and its regions.

In line with the above, ProColombia, the entity in charge of promoting international tourism, foreign direct investment, non-traditional exports and the Country Brand of Colombia, has designed an investment attraction strategy for sustainable development, aiming to contribute to the United Nations Sustainable Development Goals. This strategy is framed within the National Development Plan of the National Government and the Reindustrialization Policy led by the Ministry of Commerce, Industry, and Tourism.

Its execution aims to contribute to Colombia's reindustrialization process through foreign direct investment contributions, promote comprehensive regional development, and encourage knowledge transfer with a focus on research, development, and innovation (R&D&I).

The objective is to make Colombia a transformative, fair, balanced, and sustainable power of life.

The Reindustrialization Policy has established specific strategic objectives to drive the country's development, targeting sectors that have been underutilized for years and aiming to harness Colombia's potential.

The strategic objectives are as follows:

Energy transition: Support will be provided for decarbonization and reducing economic dependence on oil and coal, creating new sources of production of goods and services that will reshape the productive matrix by integrating alternative energies. Technology transfer and the arrival of foreign direct investment with a sustainable focus will be crucial in this sector.

Agro-industrialization and food sovereignty: Agro-industrial production will be boosted, improving rural chains where digital agriculture and ecological restoration will be key elements in industrializing a modern, socially inclusive field that fully utilizes technology.

Reindustrialization in the health sector: Colombia will generate local production capacity for active excipients, medicines, vaccines, devices, and parts for medical devices.

Reindustrialization for defense and life: The capabilities of the military industry will be leveraged for the development of the shipbuilding and aeronautical sectors, infrastructure, and technological services for these companies.

Territories and their business fabric: The Reindustrialization Policy recognizes territories and their needs. Therefore, support will be provided for the implementation of their proposals and those of the business fabric in the regions.

With the Sustainable Reindustrialization Policy, the goal is to ensure that all instruments serving Colombians are oriented towards industries that have environmentally friendly production and are committed to combating climate change.

Given Colombia's ambitious sustainability goals, FDI becomes even more important. Although Colombia represents only approximately 0.4% of global emissions, the country has committed to reducing its emissions by 51% by 2030, achieving carbon neutrality by 2050, achieving zero net deforestation by 2030, and declaring 30% of its maritime and continental territory as protected areas by 2030, among other objectives. This is because Colombia is vulnerable to climate change, and its natural capital, including biodiversity, is of vital importance.

Colombia has highly favorable conditions for attracting FDI that contributes to achieving these objectives, including a variety of environmental and social needs, privileged characteristics (being the most biodiverse country per square meter and the sixth with the largest freshwater reserves), proximity to relevant markets in the region, among other factors.

Colombia is already a regional benchmark in green finance, being the first country in Latin America to adopt a Green Taxonomy and the second to issue sovereign green bonds. The country offers specific investment opportunities in various sectors, such as renewable energy, sustainable agriculture, forestry, bioeconomy, and sustainable mobility. Furthermore, it has a highly committed business fabric, with many companies reporting on sustainability according to the Global Reporting Initiative (GRI) criteria and surpassing the regional average in incorporating the 2030 Agenda and SDGs into their strategies.

Colombia benefits from different forms of sustainable investment, including investment with environmental, social, and governance (ESG) criteria, impact investment, and blended finance, among other approaches.

ESG investors are often multinational companies, large capital funds, banks, and other actors who decide to incorporate these criteria to reduce risks, increase returns, and contribute to sustainability.

An example of ESG criteria investment in Colombia is the British capital fund John Laing, which acquired 30% of the Ruta del Cacao road project for approximately £62 million. They have incorporated ESG practices based on their experience with a road project in the Netherlands. Within the project's influence area, they have made social investments in water treatment plants and a school to address the water problem in the Santander region, which has historically suffered from water scarcity. The objective is to improve water quality and provide access to those who lack it. Additionally, the development of up to five water treatment plants and support for productive projects in the area are expected.

Impact investment prioritizes generating positive effects in the environmental and social spheres, focusing on sectors such as agribusiness, financial inclusion, financial technology, and renewable

energy. These investments significantly benefit vulnerable populations and regions, addressing urgent social and environmental needs. An example of this type of investment in Colombia is the Swiss fund Fair Capital, which has invested in Fairtrade-certified cooperatives and works with indigenous communities in coffee production. Another example is the Triple Jump fund from the Netherlands, which has invested $20 million in the Andes Impact I regional fund for Colombia and Peru, focusing on small and medium-sized enterprises in inclusive sectors such as agribusiness, social technology, and light manufacturing, with a gender equity and social impact focus in the most affected areas of these countries.

Blended finance is another form of investment that contributes to achieving sustainable goals by combining different sources of financing, including FDI, public resources, international cooperation, and other non-repayable resources. This allows for more funding leverage and greater impact by establishing a common objective among diverse actors and mitigating various market risks, such as country risk and currency risk. An example of this is the 5G infrastructure projects under the Public-Private Partnership (PPP) scheme, in which different actors participate in financing, and the concessionaire company must comply with high environmental and social standards as per the concession agreement.

In conclusion, sustainable investment plays a fundamental role in achieving sustainable development goals in Colombia and globally. The adoption of investment policies that promote inclusive growth and sustainable development has led to exponential growth in sustainable investment in recent years. Colombia has favorable conditions to attract this type of investment, including its biodiversity, natural resources, commitment to sustainability, and dedicated business fabric. Investment with ESG criteria, impact investment, and blended finance are key approaches that contribute to sustainability and the achievement of the country's set objectives.

Sectors with the highest potential for sustainable investment in Colombia include renewable energy, sustainable agriculture, forestry, bioeconomy, and sustainable mobility, among others. These sectors present concrete opportunities for investors interested in generating a positive impact in the environmental and social spheres while achieving long-term financial returns.