- The pension system has great potential for investment by managing resources that represent 50% of GDP. Only the Mandatory Complementary Pension Regime (ROPC) manages what is equivalent to 25% of the Gross Domestic Product (GDP), with an approximate capital of some 15 billion dollars.
- Investment managers have until December 2023 to incorporate the sustainable or responsible component in investment management policies.
San José, Costa Rica - At the end of September, with the aim of promoting innovative financing instruments for institutional projects in Costa Rica that promote sustainable development, the United Nations and its agencies: UNICEF , UNFPA and UNESCO ; Together with the Costa Rican Association of Pension Operators (ACOP) and the Superintendency of Pensions, they organized a discussion aimed at representatives of the country's institutional investors and pension funds.
Stephan Brunner, Vice President of Costa Rica, stressed that the leading role of the private sector is essential in these times. Currently, the level of government indebtedness limits investment in social projects. In 2021, Costa Rica allocated 40% of Central Government spending to debt service.
For this reason, several of the exhibitors at the event argued that the intervention of the private sector is essential in financing projects that promote economic and human development in the country. Some of these initiatives may be the construction of roads, schools and support for the child care network, green investment for climate change mitigation, the blue economy for tourism projects and the eradication of poverty in coastal areas.
“From the United Nations we advocate that all investments have as an objective, beyond profitability, the health of the planet, and also the fulfillment of sustainable development objectives. In this specific case we are talking about the development of Costa Rica and the possibility of creating new financial instruments that facilitate the investment of pension funds and insurers in private and public development projects within the country”, said Allegra Baiocchi, Resident Coordinator of the United Nations in Costa Rica.
It is urgent to create financial instruments
To enable the collaboration of the private sector in the implementation of development projects, instruments must be created that allow timely participation by potential financiers and, at the same time, guarantee performance for the final consumer or people who contribute money for their pensions. .
For this, the United Nations hired the firm Inflection Finance, whose representatives at the event, Nelson Stratta and Alexander Wiesel, presented examples of financial mechanisms that are not yet used in Costa Rica and that could help finance Costa Rica's national priorities.
For her part, Marie-Laure DANG, from BNP Paribas, also showed the importance of developing these instruments, one of which has just been launched in Mexico with the support of the Inter-American Development Bank.
The national pension system in Costa Rica could benefit from this type of instrument. According to SUPEN, the pension system has great potential for investment by managing resources that represent 50% of GDP, and only the Mandatory Complementary Pension Regime (ROPC) is equivalent to 25% of the Gross Domestic Product (GDP), with a capital of about 15 billion dollars.
Adrián Pacheco Umaña, Superintendent of the Superintendence of Pensions (SUPEN), explained that the country has already traveled a certain way in this regard, since the National Council for the Supervision of the Financial System (Conassif) recently approved a regulatory adjustment so that the supervised entities incorporate into its investment management policies the sustainable or responsible component.
Some projects that could channel investments in Costa Rica
- A green investment private equity fund. This impact fund will provide equity investments or loans to private companies willing to make green investments, produce nature-based solutions, or develop new green technologies for climate change adaptation and mitigation purposes.
- Social housing. Mechanisms to leverage the resources of the Housing Mortgage Bank and the Ministry of Housing and Human Settlements (MIVAH) to encourage private investment in social housing. The pre-feasibility will consider the use of various savings and credit mechanisms to facilitate the financial inclusion of beneficiaries living in the informal economy.
- Blue Economy. Public debt management mechanisms to encourage investment in infrastructure and management of coastal protected areas to promote private investment in tourism and production and the eradication of poverty in areas related to the coastal economy.
- Institutional Investment. Analyze the feasibility for the creation of new financial instruments that facilitate the investment of pension funds and insurers in private and public development projects within the country.
“This has a transitory period of 18 months. It was approved last May, so that, by December 2023, all policies should incorporate these issues. The other component that was approved at the same time is that the risks associated with environmental, social and governance issues are incorporated into the strategy, governance and above all, in the management of entities”, argued Mayor Pacheco.
Along the same lines of encouraging investment with environmental, social and governance criteria, Eduardo Atehortua, from the Principles for Responsible Investment Association, and Víctor Laudisio, from Starndard & Poors, made presentations.
For his part, Róger Porras, president of the Costa Rican Association of Pension Operators (ACOP), emphasized that the Pension Operators are fully willing to contribute, investing the resources that these entities manage, not only to meet the objective of the complementary regime, to pay pensions to its affiliates, but to contribute to national development.
“This event is of transcendental importance because it makes known what responsible and sustainable investments are. In addition, it expands the diversification framework of the portfolios that we have in Costa Rica and, in turn, can satisfy many needs, defining project priorities that can be developed in the country. So, an important relationship is built between sustainable investments and economic growth,” said Porras.
Note prepared by UNICEF . Editions by the United Nations Development Coordination Office.