CAF issues the first resilience bond for Latin America and the Caribbean with support from UNDRR – UNDRR

Report on the Inaugural Resilience Bond for Latin America and the Caribbean

Executive Summary

A resilience bond valued at USD 100 million has been launched to finance critical infrastructure in Latin America and the Caribbean. This initiative, the first of its kind in the region and the second globally, is aligned with the Climate Bonds Resilience Taxonomy. Its primary objective is to mobilize capital market resources to reduce climate-related vulnerabilities and ensure the continuity of essential services, directly supporting the achievement of multiple Sustainable Development Goals (SDGs). The United Nations Office for Disaster Risk Reduction (UNDRR) provided technical coordination for project selection. Initial projects have been identified in Brazil, the host nation for COP30.

Strategic Alignment with Global Frameworks and Sustainable Development Goals

The bond’s framework is strategically designed to align with key international agreements and significantly contribute to the 2030 Agenda for Sustainable Development. The initiative supports Priority 3 of the Sendai Framework for Disaster Risk Reduction and Article 2.1(c) of the Paris Agreement. Its core mission is deeply integrated with the following SDGs:

• SDG 9 (Industry, Innovation and Infrastructure): By financing the development of high-quality, reliable, sustainable, and resilient infrastructure.
• SDG 11 (Sustainable Cities and Communities): By investing in projects that make cities and human settlements inclusive, safe, resilient, and sustainable, particularly through strengthened critical services.
• SDG 13 (Climate Action): By directly funding climate adaptation measures that strengthen resilience and adaptive capacity to climate-related hazards and natural disasters.
• SDG 6 (Clean Water and Sanitation): Through targeted investments in resilient water and sanitation infrastructure.
• SDG 7 (Affordable and Clean Energy): By supporting distributed energy systems to ensure power for critical services during extreme events.
• SDG 17 (Partnerships for the Goals): The collaboration between CAF and UNDRR exemplifies a multi-stakeholder partnership to mobilize financing for sustainable development.

Project Focus and Eligibility Criteria

Proceeds from the bond are earmarked for projects that demonstrably enhance the resilience of communities and economies. The allocation of resources will prioritize local investments that strengthen critical infrastructure and protect essential services.

Target Investment Areas

• Water and sanitation systems
• Drainage and flood control
• Waste management
• Distributed energy for critical services
• Nature-based solutions
• Safe and resilient mobility projects

Project Eligibility Requirements

To qualify for financing, projects must demonstrate a clear contribution to resilience through a structured verification process. The core criteria include:

1. Reduced exposure and vulnerability to climate hazards.
2. Proven operational capacity during and after extreme weather events.
3. Shorter recovery times for essential services following a disruption.

Regional Impact and Outlook

This resilience bond addresses a critical investment gap in Latin America and the Caribbean, where spending on disaster response and recovery has historically surpassed investment in risk reduction and resilience. According to the Regional Assessment Report on Disaster Risk (RAR), regional budgets for disaster risk reduction are limited. This financial instrument provides a mechanism to channel private capital toward proactive measures that reduce future losses, protect livelihoods, and advance urban resilience. The partnership between CAF and UNDRR marks a significant milestone in mobilizing resources to ensure cities are better prepared and local economies can recover more rapidly, thereby accelerating progress toward the Sustainable Development Goals in the region.

Analysis of SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 11 (Sustainable Cities and Communities):
   • The article explicitly states that the approach aligns with “Sustainable Development Goals 11 (Sustainable Cities and Communities)”. The focus is on financing resilient infrastructure to ensure the continuity of essential services and reduce the vulnerability of populations in urban and community settings, aiming to boost “urban resilience”.
2. SDG 13 (Climate Action):
   • This goal is also explicitly mentioned. The bond is “aligned with the Climate Bonds Resilience Taxonomy” and is designed to finance infrastructure that enables the region to “adapt to the climate crisis” and reduce vulnerabilities to “climate hazards” and “extreme events”.
3. SDG 9 (Industry, Innovation and Infrastructure):
   • The core theme of the article is mobilizing resources to finance “resilient infrastructure” and “critical infrastructure”. The projects aim to strengthen infrastructure related to water, energy, and mobility to withstand extreme events.
4. SDG 6 (Clean Water and Sanitation):
   • The article specifies that the bond’s resources will be allocated to projects in “water and sanitation, drainage and flood control”, which are central components of SDG 6.
5. SDG 7 (Affordable and Clean Energy):
   • The bond will fund “distributed energy for critical services”. This directly supports the goal of ensuring reliable energy, particularly in the context of maintaining essential services during climate-related disruptions.
6. SDG 17 (Partnerships for the Goals):
   • The article describes a partnership between CAF, the United Nations Office for Disaster Risk Reduction (UNDRR), and the Climate Bonds Initiative (CBI). This collaboration to “mobilize large-scale resources” and provide technical coordination is a clear example of a multi-stakeholder partnership to achieve sustainable development.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 11.5: “By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses… caused by disasters…”
   • The article’s objective to “reduce the vulnerability of its populations to extreme events” and direct capital to projects that “reduce losses” and “protect livelihoods” directly aligns with this target.
2. Target 11.b: “…implementing integrated policies and plans towards… adaptation to climate change, resilience to disasters, and develop and implement, in line with the Sendai Framework for Disaster Risk Reduction…”
   • The article explicitly states that the bond’s approach aligns with “Priority 3 of the Sendai Framework for Disaster Risk Reduction” and aims to finance projects that “strengthen the resilience of critical infrastructure”.
3. Target 13.1: “Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.”
   • This is the central theme of the article. The bond is designed to “finance resilient infrastructure aimed at reducing vulnerabilities to climate hazards” and help the region “adapt to the climate crisis”.
4. Target 9.1: “Develop quality, reliable, sustainable and resilient infrastructure… to support economic development and human well-being…”
   • The initiative focuses on financing “critical infrastructure” in sectors like water, energy, and mobility, with the goal of ensuring it remains operational during extreme events, thereby supporting both well-being and economic recovery.
5. Target 17.3: “Mobilize additional financial resources for developing countries from multiple sources.”
   • The article describes a “$100 million” resilience bond designed to “mobilize capital market resources” for projects in Latin America and the Caribbean, directly addressing the need to close the investment gap in disaster risk reduction.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Financial Investment in Resilience:
   • The article explicitly mentions the value of the bond as “$100 million”. This amount serves as a direct indicator of the financial resources being mobilized for resilience projects. It also notes that countries “allocate a limited proportion of their budget to disaster risk reduction,” implying that an increase in this proportion would be a key progress indicator.
2. Project Performance Metrics:
   • The article states that “Projects should demonstrate reduced exposure and vulnerability, operational capacity during extreme events, and shorter recovery times.” These are specific, measurable criteria that act as performance indicators for the funded infrastructure projects.
   • Reduced exposure and vulnerability: Can be measured by assessing the number of people or critical assets protected by the new infrastructure.
   • Operational capacity during extreme events: Can be measured by the percentage of uptime for essential services (water, energy, mobility) during a climate-related disaster.
   • Shorter recovery times: Can be measured by the time it takes for essential services to be fully restored after an event.

4. Table of SDGs, Targets, and Indicators

Source: caf.com