Latin America’s transition finance challenge is as much about transforming its economies as it is about mobilising capital.
Discussions at the Americas transition finance summit, organised in Mexico City by OMFIF and Bolsa Institucional de Valores, Mexico’s institutional stock exchange, highlighted a region with substantial opportunities in renewable energy, sustainable infrastructure and new industries. However, persistent barriers to turning those opportunities into investable projects remain.
Across the sessions, resilience emerged as the key theme, underscoring the need for stronger businesses, better infrastructure and portfolios that can manage environmental, social and financial risks.
The need for economic transformation
In his keynote address, José Luis Samaniego, undersecretary of sustainable development and circular economy at SEMARNAT, emphasised the region’s competing goals, including accelerating economic growth, reducing poverty and protecting the environment, all simultaneously. Achieving these objectives requires changing the productive structure of Latin American economies. Investment must support sectors that raise productivity, create opportunities for local businesses and workers, and reduce environmental pressures.
Transition finance therefore needs to consider both the sectors it funds and the economic capabilities it helps build. A critical point is diversifying the economy into sectors that can overcome these challenges, with green sectors offering major opportunities. Renewable energy, electromobility, the bioeconomy and circular economy are examples. Their development requires coordination across public policy, infrastructure, research and finance, as well as the technological capability and business capacity to finance these initiatives.
Raising capital
To support these productive sectors, companies need access to appropriate capital. In sustainable finance, the discussion goes beyond a choice between debt and equity. Businesses must understand why they are raising money, how it will create value and whether the financing structure fits their cash flows, risks and investment horizons. Corporate governance is central to supporting this. Transparency, compliance and clear decision-making help investors assess risks and build confidence.
For smaller companies, a financial partner can help diagnose the business, set achievable milestones and strengthen governance as the company grows. Partnerships can also broaden access to funding, for example by joint securitisation. Development banks and multilateral institutions can contribute risk-sharing mechanisms, legal expertise, compliance support and institutional oversight. Such arrangements are particularly valuable where individual businesses or financial institutions lack the scale to access markets independently.
One panellist mentioned that in some cases, companies already generate positive environmental or social outcomes but struggle to communicate them. Clear indicators, credible reporting and external verification can make those contributions visible and improve access to capital. A sustainable label cannot replace a viable business model, and impact claims need evidence to build investor confidence.
Infrastructure as a key sector
As a rule of thumb, it is recommended to invest at least 5% of gross domestic product, but Mexico and the wider region are generally below that. Infrastructure investment can help close this gap and enable development. The region offers significant energy investment opportunities, but generation capacity must develop alongside water, transport, land access and electricity networks. A data centre, for example, depends on several of these systems functioning together. Infrastructure investment therefore requires an understanding of the surrounding ecosystem and the constraints that could undermine a promising asset.
Project preparation and assessments also play an important part in funding availability. Investors need credible revenue forecasts, permits and reliable technical information. For example, renewable energy projects must account for network constraints, losses and the possibility of curtailment. However, major investment concerns can include a lack of track record or project guarantees. Experienced partners and allies can provide this, strengthen due diligence and help allocate risks to the parties best equipped to manage them.
In addition, investors require not only capital returns, but also project resilience and social returns. Community engagement is therefore an important part of the investment analysis. Infrastructure projects operate in places with existing livelihoods, land rights and social expectations. Meaningful engagement can help identify problems early and establish the relationships needed for long-term operation. Financial and social returns depend both on the project’s ability to operate reliably and retain local support.
Physical risks and diversification
Physical climate risks affect assets differently by location, sector and business model. One panellist highlighted how rising temperatures can amplify energy demand, drought and wildfire risks, while water stress cuts across industry, agriculture, tourism, housing and infrastructure. Investors need to assess these pressures alongside transition risks, including changing technologies and the potential loss of value in carbon-intensive assets, and how risks affect revenues, costs, collateral and repayment capacity.
At portfolio level, they must also consider concentration: several apparently different investments may depend on the same water supply, infrastructure network or climate-sensitive market. Diversification requires understanding those shared dependencies, along with cash-flow stability, liquidity and regulatory conditions. The opportunity is to direct capital towards businesses and infrastructure that can withstand these pressures while helping economies adapt.
Companies with credible transition plans can offer better investment opportunities. Assessing those plans requires the same discipline applied elsewhere: credible governance, realistic financing, measurable progress and clear accountability. The summit’s discussions point towards a demanding agenda. Latin America can use transition finance to build productive capacity, improve infrastructure and strengthen resilience. Doing so requires sustained collaboration between companies, governments, investors and development institutions, with financial viability and development outcomes considered together.
Andrea Correa is Head of Research at OMFIF.
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