Deals of the YEar awards
Chile has long been favored by investors for its track record of sound fiscal management. 2022 was no exception in this regard. But what was different was the significant boost to its already well-established credentials as a sustainable innovator in sovereign debt markets.
The country, which has once again won the award for Sovereign Issuer of the Year, issued the world’s first sovereign sustainability-linked bond last March, a $2.2 billion 20-year note that includes environmental targets and which won the award for Sovereign ESG Deal of the Year.
Prior to that it had issued a $4 billion, three-tranche sustainable bond, taking advantage of a small window of opportunity in January amid turbulent markets to fund two-thirds of its foreign currency needs for the year.
Chile, of course, had already broken new ground in December 2021, offering sustainable bonds in local currency for the equivalent of $1.26 billion in the local market.
According to Chile’s finance minister Mario Marcel, after the flurry of sustainable issuances of the past few years, 31% of Chile’s debt stock is now linked to ESG principles. The goal is for sustainable debt to account for half in the next four years.
“In only four years, Chile became the first country in the Americas to issue green bonds, from having no ESG-related issuance during the previous years, and the first sovereign in the world to issue a SLB bond,” Marcel says. “Thus, Chile has issued in different ESG formats, such as green, social, sustainable and SLB bonds.”
Marcel adds that, in addition to meeting funding needs, Chile’s sustainable bond strategy aims to promote ESG issuance in both public and private sectors. It also provides additional visibility to Chile’s decarbonization plan and its alignment with the UN Sustainable Development Goals (SDGs).
“The priority is to reach an equilibrium between the optimal financial cost and the ‘greenification’ of the debt stock, offering ESG bonds to the international and local markets,” he says. “In addition, Chile is analyzing the responsible investment of its sovereign wealth funds.”
Marcel also stresses that Chile’s sustainability program has confirmed the high demand for ESG securities, and that some issuances already achieve a premium for presenting sustainable features.
“Chile is committed to future issuances in the ESG market through green, social, sustainable and SLB bonds, but also assessing the possibility to issue other innovative instruments, as long as they efficiently help to provide climate solutions and to address social issues,” Marcel says. LF