In a groundbreaking move, Brazil successfully raised $2 billion on Monday through its debut ‘green’ bond issuance, securing a 6.15% yield, as reported by an anonymous source with knowledge of the transaction.
The seven-year bonds mark a strategic initiative to establish a benchmark within the private market, concurrently aligning financial resources with the government’s ambitious sustainability agenda.
The undisclosed source emphasized that the spread of this environmentally-focused issuance was notably lower compared to the conventional $2.25 billion bonds released in April. “At this rate of 6.5%, we are trading only 15 points above… a Mexican bond, which is investment-grade,” the source revealed.
Brazil had relinquished its investment-grade status in 2016 amid a severe economic downturn and political turmoil following the global commodity boom.
While Fitch upgraded Brazil’s credit rating in July and S&P improved its outlook in June, the nation is yet to reclaim its coveted investment-grade status.
The Brazilian Treasury announced earlier on Monday that the Environment, Sustainability, and Governance (ESG)-linked bonds, maturing in 2031 and denominated in dollars, would be disclosed at the end of the day.
Leading the operation were banking giants Itaú BBA, JPMorgan, and Santander (BME:SAN).
In late August, Dario Durigan, the Finance Ministry’s executive secretary, stated that the government aimed to issue around “$2 billion” to serve as the financial foundation for President Lula’s ambitious ecological transition plan.
Officials indicated that the funds from the operation would predominantly contribute to the Climate Fund under the supervision of the state development bank BNDES.
President Lula, who assumed office in January, has actively pursued efforts to enhance Brazil’s environmental track record. His green plan encompasses the establishment of a regulated carbon credit market, aligning with a broader strategy to attract investments to Latin America’s largest economy.
Photo (Mateus Bonomi)
By Delino Gayweh
Serrari Financial Analyst
November 14, 2023
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