latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/world-s-1st-sovereign-sustainability-linked-bond-issued-by-chile-69226229 content esgSubNav
In This List

World's 1st sovereign sustainability linked bond issued by Chile

Blog

Banking Essentials Newsletter: September 18th Edition

Blog

Navigating the New Canadian Derivatives Landscape: Key Changes and Compliance Steps for 2025

Blog

Getting an Edge with Services: Driving optimization by embracing technological innovation

Blog

Banking Essentials Newsletter: August 21st Edition


World's 1st sovereign sustainability linked bond issued by Chile

Chile issued the world's first sovereign sustainability linked bond this week, the finance ministry said.

The $2 billion sustainability-linked bond was issued March 2, carrying a 4.346% rate or 200 basis points above 20-year U.S. Treasury notes. Demand for the bond reached more than $8 billion, or 4.1 times the original placed amount, spread across investors in Europe, Asia and the Americas. Finance Minister Rodrigo Cerda noted this was a sign of confidence in the Chilean economy.

The bond adheres to the Paris Agreement on climate change, including that the country emit no more than 95 metric tons of carbon dioxide and equivalent by 2030 and that 60% of electricity production be derived from renewable energy by 2032.

Chile was the first country in the Americas to issue a green bond in 2019. With the recent issuance, it has placed about $33 billion worth of socially and environmentally responsible bonds over the past three years, and it is the only country in the world to have green, social and sustainablity-linked bonds, according to Leisa Souza, head of Latin America at nonprofit organization Climate Bonds Initiative.

Sustainability-linked bonds are the fastest-growing type of environmental bonds, Anne Van Riel, head of sustainable finance for the Americas at BNP Paribas SA told S&P Global Market Intelligence. The bonds are financial instruments designed to provide incentives to meet ambitious climate change objectives by the issuer, which are measured through a series of key performance indicators. These bonds are not associated with specific green projects, but their coupons depend on the issuer's attainment of the specified objectives.

In 2019, Latin American green bond issuances saw a notable 46 green bonds issued, primarily attributed to Chile. Sovereigns issued fewer green bonds and more social and sustainability bonds in 2020 and 2021 as countries focused on issues surrounding the COVID-19 pandemic, Souza said.