El Salvador has emerged as the frontrunner in the 2023 Sustainable Finance Index (SFI) for Latin America, according to data from 2022. The index, compiled by the Latin American and Caribbean Climate Finance Group (GFLAC), assesses nations’ efforts in progressing towards a sustainable development model.
In a report released during the Latin America and Caribbean Climate Week, El Salvador secured a remarkable score of 2.9 out of 4.0, marking the highest rating among the 20 most greenhouse gas-emitting countries in the region. Notably, it was the sole nation to achieve the “high level” categorization for sustainable finance, the second-highest tier in the ranking, with none of the studied countries reaching the “very high level.”
The GFLAC report highlights that El Salvador and Guatemala have made significant improvements in their ranking positions over four editions of the SFI. El Salvador, in particular, has seen its score rise from 2.0 points in the 2020 SFI to 2.9 points in the 2023 edition, firmly establishing itself as the top-ranking nation for sustainable finance in the past two editions.
The Sustainable Finance Index serves as a tool for monitoring both domestic and international revenues and expenditures related to climate change and sustainable development. It identifies carbon-intensive financial flows that may hinder the transition toward low-carbon, climate-resilient development.
El Salvador’s commitment to sustainable budgets is evident as it allocated 2.1% of its budget towards environmental sectors associated with climate change, energy efficiency, renewable energy, and disaster management. It’s worth noting that El Salvador’s energy matrix is comprised of approximately 80% renewable sources, including hydroelectric, solar, and geothermal power. The government, under President Nayib Bukele, recently inaugurated a new hydroelectric plant named “3 de Febrero,” further promoting clean energy production.
Conversely, the GFLAC expresses concern over countries like Mexico and Trinidad and Tobago, which have seen a decline in their sustainable finance rankings. These nations received more carbon-intensive revenues than income from climate change mitigation sources.
“Uruguay, Mexico, and Trinidad and Tobago have all regressed in the Sustainable Finance Index. Uruguay’s score dropped from 1.6 points in the 2020 edition to 0.7 points in the 2023 edition, while Mexico’s score fell from 1.5 points in 2020 to 0.7 points in 2023,” the report notes.
El Salvador’s remarkable achievement in leading the Sustainable Finance Index underscores the nation’s dedication to environmentally responsible fiscal policies and sustainable development. It sets a positive example for the region and demonstrates the potential for countries to make significant strides in promoting a sustainable and resilient future.