Climate change shifts financial risk profiles in Latin America

Climate change is increasingly impacting the financial risk profiles of agricultural and real estate portfolios in Latin America. A report by WTW Corredores de Seguros indicates that the rising frequency of hurricanes, droughts, and floods is transforming these sectors into significant financial risks. Notably, 41% of banks in Latin America and the Caribbean currently lack formal tools to measure how environmental factors affect their credit portfolios, a gap that is particularly critical for the agricultural sector.

In the real estate and infrastructure sectors, long-term assets in coastal or flood-prone areas face significant valuation adjustments over the next 10 to 20 years. In response, central banks and regulatory authorities, particularly in Central America and the Caribbean, have begun implementing climate stress tests.

In Colombia, environmental leadership is shifting with the appointment of Fabio Arjona Hincapié to lead the Ministry of Environment. Arjona's tenure coincides with reports from IDEAM showing a 40% increase in Amazonian deforestation during the first quarter of 2026 compared to the previous year. The Colombian government has recently declared the Amazon biome a definitive reserve of renewable natural resources, prohibiting new mineral and hydrocarbon exploration in the area, while also working to regulate the carbon credit market.