Colombia's Superintendencia Financiera de Colombia has issued External Circular 005 of 2024, making the integration of environmental, social, and governance factors into information disclosure obligations for regulated financial institutions a legal requirement rather than a voluntary standard. The regulation extends a supervisory framework that has been building since Colombia became the first country in Latin America to develop a green taxonomy, a distinction it has now reinforced by publishing a refined version of that taxonomy in 2024.
The scope of the new circular is broad: 91% of banking assets in Colombia are now subject to ESG integration requirements, the Superintendencia reported. Separately, 80% of banks in the country disclose ESG risk management performance, and 99.5% of banks report ESG activities to the regulator on a regular basis — a near-total compliance rate that reflects the SFC's graduated approach of building reporting infrastructure before tightening disclosure obligations.
GREEN TAXONOMY REFINED FOR 2024
Colombia's Green Taxonomy, first published in 2022 and now updated, classifies economic activities eligible for sustainable finance treatment across sectors including energy, transport, agriculture, and water management. The 2024 revision refines eligibility criteria and screening thresholds, providing financial institutions with clearer guidance on which lending and investment activities can be labelled green for regulatory and disclosure purposes.
The taxonomy's development reflects Colombia's alignment with international frameworks, including the European Union's taxonomy regulation, while adapting eligibility criteria to the country's specific economic structure and environmental priorities. For Colombian banks, the taxonomy provides the definitional scaffolding that makes Circular 005 workable in practice: institutions need a clear classification system to integrate ESG factors into disclosure without facing interpretive uncertainty about what qualifies.
Latin America's broader sustainable finance regulatory landscape has been fragmented, with individual jurisdictions advancing at different speeds. Colombia's combination of a legally binding disclosure circular, an updated taxonomy, and near-universal reporting compliance gives it a more integrated framework than most regional peers, and creates a reference model that other central banks and securities regulators across the region are expected to study.
DISCLOSURE REQUIREMENTS TAKE HOLD
Circular 005/2024 requires regulated institutions to embed ESG factors into their information disclosure across several dimensions, including risk management reporting, investment policy disclosures, and client-facing communications where relevant. The SFC said the requirement is designed to ensure that ESG considerations are reflected in the information available to investors, counterparties, and supervisors rather than confined to standalone sustainability reports.
For smaller financial institutions that make up a portion of the 91% of assets covered, the practical challenge lies in building the internal data collection and reporting systems needed to comply consistently. The SFC has indicated that its supervisory approach will take account of institutional capacity constraints during the initial implementation period, while making clear that the direction of travel is towards fully integrated ESG disclosure.
Colombia's financial regulators have positioned the country's sustainable finance programme as a model for the region, and the combination of Circular 005 and the updated taxonomy gives the SFC a set of tools it can point to in international forums as evidence of substantive regulatory progress rather than aspirational commitments.