Latin America Trails in Sustainable Finance

Latin American and Caribbean countries are not directing enough resources to address the climate crisis, according to the Sustainable Finance Index 2025 (IFS2025) developed by the Climate Finance Group for Latin America and the Caribbean (GFLAC). The index found that the 20 largest greenhouse gas emitters in the region earned revenues in 2024 that were 11 times higher from polluting activities than from sustainable sources. This trend highlights a continued dependence on fossil fuels and a limited fiscal capacity to finance a just transition toward low-carbon economies, despite commitments under the Paris Agreement.

Based on fiscal data from 2024, the report concluded that Latin American governments allocated five times more of their budgets to carbon-intensive sectors such as oil extraction and mining, than to sustainable programs linked to climate action and biodiversity protection.

On average, the countries analyzed generated about US$199 billion from extractive and polluting activities, compared to only US$18 billion from sustainable income. Public spending followed a similar pattern, with US$71 billion directed to carbon-intensive sectors and just US$13 billion to sustainable initiatives.

While the gap has narrowed slightly compared with the previous edition of the index, when polluting revenues were 19 times greater than sustainable ones, progress remains insufficient to reduce the structural dependence of Latin American economies on fossil resources.

The report warned that without a profound fiscal transformation, the region will struggle to meet Art. 2.1(c) of the Paris Agreement, which calls for aligning financial flows with low-carbon, climate-resilient development.

GFLAC emphasized that fiscal transparency, the reduction of fossil fuel subsidies, and an increase in debt-free international financing are key to closing the structural gaps that limit climate action in the region. “The challenge is not only technical but also political: public budgets must reflect the climate emergency,” the report concluded.