Brazil’s Finance Ministry revealed that the country is in talks with Mexico, Germany, Colombia, and Chile about setting up a framework to issue environmental, social, and governance (ESG) bonds, as reported by Reuters on February 10. The four states consulted by Brazil have all issued their sovereign green bonds, with Chile being the first Latin American country to issue the bond. Brazil’s Treasury Secretary stated that the country aims for “a robust framework that will serve as a reference for an active and constant presence” in markets focused on themes like climate change. Talks on the framework also involved the World Bank and the Inter-American Development Bank [ITAD:US], the Secretary added. However, the date for the official launch of the program has yet to be decided.
Brazil attempted to establish a framework for issuing an ESG sovereign bond in early 2021, during the Bolsonaro administration, but it failed. The new Lula da Silva government also looks to tap green bonds to help fulfill its commitments to combating deforestation in the Amazon. It may choose between use-of-proceeds bonds, which commits to financing green projects such as renewable energy, or sustainability-linked bonds, used for general budget purposes but whose return is linked to the country’s performance on environmental metrics. In January 2023, the Brazilian government announced plans to issue its inaugural green bond this year. The bond must be linked to green projects such as sustainable agriculture and energy transition.