LatAm green bond issuances drop in 2021, but surpass pre-pandemic levels

Green bond issuances in Latin America fell in 2021 from the previous year as the coronavirus hurt demand and corporate optimism. However, the total volume topped pre-pandemic levels.

Issuances for Latin American-based institutions and sovereigns hit a record in the first quarter of 2020, tumbled in the second quarter and recuperated for the rest of the year, reaching the highest annual level ever at $7.82 billion. That fell to $6.8 billion last year, which was nonetheless a jump from 2019's pre-pandemic $5.23 billion, according to data from Climate Bonds Initiative.

Green bonds around the world are increasingly popular as investors hold companies and countries responsible for socially and environmentally sustainable practices, rather than profit alone. The pandemic led to delays or cancelations in issuances over concern that the virus and subsequent lockdowns would make it hard to effectively and profitably use the proceeds, said Diego Stapff, a director at Finance in Motion and an adviser to LAGreen, a Latin American green bond fund.

Issuers in the fourth quarter included Colbún SA with $600 million, Mingyang Smart Energy (BVI) Co. with $200 million and Caramuru Alimentos S.A. with more than $63 million.

Sovereign bond issuances that had been the leading category in 2019 and 2020 fell in 2021 as governments focused on managing the pandemic, S&P Global Ratings analyst Lorena Briz said in an interview.

When split among type of issuers, nonfinancial companies accounted for 53% of green issuances in 2021, up from 37% in 2020 and from 44% in 2019. That's a good sign of a developing market, Stapff said in an interview. As companies grow, they appear to be choosing to raise new money by issuing green bonds, rather than borrowing from banks.

The diversity of green bond issuers has also improved, Stapff said in an interview. In 2020, there were 100 different green bonds issued across a broad variety of companies, government, government-backed entities and others. That compares to three years earlier when green bonds were only issued by financial companies, nonfinancial companies, and a few local government entities.