Brazil successfully raised USD2bn through its inaugural ‘green’ bond issuance, marking a significant step in establishing a benchmark for the private market and supporting the government’s sustainability goals, as reported by Reuters on November 13. The seven-year bonds, featuring a 6.5% yield, received strong demand, with the order book reaching nearly USD6bn. Finance Minister Fernando Haddad emphasized the operation’s importance, noting that the spread was comparable to investment-grade countries.

Despite recent credit rating improvements by agencies like Fitch and S&P, Brazil has yet to regain its investment-grade status lost in 2016 amid economic challenges and political turmoil. The green bonds, linked to environmental, social, and governance (ESG) criteria and maturing in 2031, were issued in dollars. The operation, led by banks Itau BBA, JPMorgan [JPM:US], and Santander [SAN:SM], aligns with President Lula’s environmental initiatives. The funds raised are expected to support Brazil’s Climate Fund, managed by the state development bank BNDES, as part of a broader effort to enhance the country’s environmental standing and attract investment through measures such as a regulated carbon credit market.

Sources:

https://www.reuters.com/sustainability/sustainable-finance-reporting/brazil-prices-2-bln-first-ever-esg-bond-65-yield-source-2023-11-13/