When Chile broke new ground in June, becoming the first Latin American sovereign to issue a green bond, it was the thought process — not just the novelty — that was impressive.
The government opted to issue in both dollars and euros, and received second party opinion from Vigeo Eiris and a certification from the Climate Bonds Initiative. Not only was it a strong statement of intent about the government’s commitment to combatting climate change, but it also brought real investor diversification.
As the best rated issuer in Latin America, Chile has long been an expensive buy for EM accounts. A green bond was therefore the perfect way to tap specialist ESG investors, for whom Chile represented a more lucrative return than their usual diet.
“The key to Chile’s successful sovereign green bond issuances was a combination of robust and credible commitment on climate action, dedicated investor engagement, and opportunistic market timing, supported by solid fundamentals and a strong macro-financial policy mix,” says Andrés Pérez, head of international finance at Chile’s ministry of finance.
It was the latest move for a sovereign issuer that has been increasing in sophistication. After issuing a first Euroclearable domestic deal in January 2017, Chile has continued to attract more international investors into its local bond curve, with total holdings increasing from around 3% in 2016 to roughly 20%.“We are committed to further improving liquidity and the Republic’s financing conditions by fostering the participation of international investors in our local bond curves,” says Pérez.