Chile leads the way in green bond issuance, with lessons for its peers in the region
July 13, 2022
Chile Leads Green and Sustainable Bond Issuance in Latin America
Chile has emerged as the leader in green and sustainable bond issuance in Latin America and the Caribbean, setting an example for the region in sustainable finance. This is one of the key conclusions from the Emerging Market Green Bonds Report, published by the International Finance Corporation (IFC), a World Bank entity.
The June 2022 report highlights that Chile has issued:
- $17.8 billion in social bonds
- $7.7 billion in green bonds
- $5.5 billion in sustainable bonds
Experts see this as a strong signal—especially for Latin America—given the climate crisis and its economic and financial impacts.
Chile’s Commitment to Climate Finance
According to Marcela Ponce, Leader of Climate Finance for Latin America and the Caribbean at IFC, global efforts to reduce emissions must increase fivefold to meet the Paris Agreement goal of limiting global warming to 2°C—or ideally 1.5°C—above pre-industrial levels.
“To meet climate targets by 2030 and avoid the most dangerous climate impacts, annual climate finance must increase by at least 590%. Chile has been leading this effort through sovereign green bond issuances. This strong market signal demonstrates Chile’s commitment and sets an example for the region and the world on closing the green financing gap.”
Chile’s green bond issuance aligns with its decarbonization goals, primarily funding electric public transportation projects, according to Eduardo Bitran, an academic at the Faculty of Engineering and Sciences, Universidad Adolfo Ibáñez (UAI).
“Chile’s undisputed leadership in sustainability and its track record in meeting commitments position it as a reliable issuer in impact-driven investments.”
A Model for Other Markets
Chile’s leadership in climate finance goes beyond green bonds. The country was:
- The first in Latin America to update its Nationally Determined Contribution (NDC) in 2020
- The first to pass a law ratifying climate commitments and assigning responsibilities to different levels of government
- One of the fastest adopters of renewable energy, particularly solar and wind
“These achievements have solidified Chile’s image as an emerging market leader in climate action,” emphasizes Bitran.
Chile’s Financial Innovation in Green Bonds
According to Marcela Ponce, Chile’s Ministry of Finance has further strengthened its position by launching a Public-Private Green Finance Roundtable.
Since 2019, Chile has:
- Issued the region’s first green bonds
- Released the world’s first-ever Sustainability-Linked Bond (SLB) of $2 billion for 30 years
“These bonds have seen strong demand and a diverse investor base, serving as a major example for regional and global markets,” notes Ponce.
Global Recognition for Chile’s Climate Policies
Patricia Torres, Global Head of Sustainable Financial Solutions at Bloomberg, highlights Chile’s cohesive approach to climate change, spanning:
- Energy sector transition policies
- Green debt issuance
- A new taxonomy for sustainable investments
“This credibility and consistency attract investors looking for countries that align with their net-zero commitments by 2050,” says Torres.
For Bitran, other Latin American countries with NDC commitments should follow Chile’s lead:
“They should develop a public-private climate finance strategy, issue sustainability bonds, and align with global decarbonization goals.”
Source: Diario Financiero