Key policies and governance approach

In 2016, Ecuador signed the National Protocol for sustainable finances to promote and facilitate the implementation of sustainable socioeconomic and environmental policies leading to open investment and new financing opportunities [5]. The protocol includes strategies to get investment from national and international banks, analysis of credit risks, and sustainable environmental consumption. The first Green Bonds in Ecuador were issued in December 2019- the Ecuadorian bank issued the first Social Bonds in the region. The protocol was ratified in 2021 by 15 banks [6]

Successes and remaining challenges

One of the main successes in Ecuador is the union between UNDP through the Biodiversity Finance Initiative and the Sustainable Finance Protocol, led by the Ecuadorian Association of Private Banks (ASOBANCA). The Protocol was voluntarily signed by 13 banks from ASOBANCA. In this context, UNDP, as an environmental authority, promotes biodiversity conservation as a strategy and reinforces a co-design of a model based on environmental and social sustainability. More than 40 representatives of the industrial and banking sectors identified green financial and sustainable finance opportunities. They analyzed new possibilities of green credit that need improvement to achieve the national goals for reducing GHG emissions and ecosystem conservation [7].

Another successful example of sustainable finance in Ecuador is related to the REDD+ Action Plan, which includes a combination of public resources and international funding. The national forest monitoring system supports Ecuador’s REDD+ Action Plan. Additionally, to ensure sustainable and effective implementation of REDD+ projects, it includes stakeholder engagement, which considers specific actions to strengthen capacities and knowledge [8]. Moreover, in 2020, the Ministry of Environment and Water launched the REDD+ Results-Based Payments Project, committed to promoting sustainable production and encouraging the restoration of deforested and degraded areas taking into account stakeholders from civil society, academia, the private sector, Indigenous Peoples, and NGOs [9].

Initiatives and Development Plans

In 2017, Ecuador published its National Development Plan, which includes guidelines for cohesion with environmental sustainability, risk management, and development [10]. Moreover, the country recently established the Creation Plan of Opportunities 2021-2025. Such a plan is the highest political and administrative guideline for designing public policy. The Plan establishes that Ecuador's priorities should be following the 2021-2025 Government Plan and the 2030 Agenda for Sustainable Development. Each policy refers to the priorities and their associated goals [11]. Ecuadorian approach includes the international Agenda and its commitment to fulfil the NDC but based on its national legislation, the country seeks to achieve its national targets through an alternative ethical paradigm that includes the rights of nature.

Goals and Ambitions

The first step to fulfil the Principles of Responsible Banking is to analyze their portfolios and to identify the sectors they are financing to assess the activities to achieve an economy with zero carbon emissions. During 2021 and 2022, two Ecuadorian banks joined the Banking Alliance for Net Zero Emissions, whose goal is that carbon emissions derived from credit and investment portfolios of financial institutions reach net zero emissions by 2050 [6].

The Banking Alliance for Net Zero Emissions, established in October 2022, integrates more than 491 global financial institutions, including Ecuadorian banks. To achieve their goal, banks must provide financing to develop renewable energy projects, energy efficiency, and climate-smart agricultural investments, among others, to ensure businesses transition to low-carbon models [6].