Can Green Bonds Boost the Development of Energy Projects in Colombia? An Opportunity for Responsible and Sustainable Investment

Abstract

The excessive exploitation of natural resources brings with it a growing environmental problem, which is largely due to industrial development. Different international treaties, conventions, and protocols try to mitigate the impacts of global warming. However, new tools are constantly needed to achieve the sustainability of economies and the preservation of renewable resources. In response to this, green bonds arise providing a coherent solution that integrates both the industry and the environment. These bonds constitute a financial instrument allowing the collection of resources, with the only requirement of being invested in sustainable projects generating environmental and social well-being. This paper highlights Colombia's potential as an emerging market attractive for investments classified as green. This Colombian green market is expected to grow, due to the low amounts of GHG emissions compared to the industrialized countries and the richness in natural resources of the nation. However, to develop sustainable energy projects in Colombia, special instruments are required to enhance the promotion and financing of energy projects. For this reason, various financing alternatives to the traditional systems for the development of clean energy must be evaluated. This paper emphasizes the potential of green bonds to improve energy projects in Colombia and obtain additional benefits to reduce climate change through the use of sustainable renewable energies. Through a document review exercise in specialized literature and the application of a case study, the advantage of green bonds over other traditional mechanisms for financing initiatives for small and medium enterprises is demonstrated.