Brazil prepares first overseas sustainable bond issue

The Brazilian government is preparing the first issue of its overseas sustainability-linked bonds, which is likely to take place this year.

"The market for sustainable bonds is growing, and we already have issues by Brazilian companies," Viviane Varga, deputy secretary of the national treasury, said in a statement. The amount involved was not provided.

The national treasury is part of the finance ministry and is responsible for handling the government’s local and foreign debt.

"The issues of these [sustainability] bonds go beyond purely environmental concerns and also encompass social aspects, demonstrating the breadth and depth of our commitment within the financing strategy we have adopted," said Varga.

The government’s move is likely to encourage more companies to follow suit.

"A sovereign issue attracts the kind of international investment funds that previously did not even look at the issues that local companies made and after this first issue, companies will also end up on the radar of these funds," Welber Barral, founding partner of BMJ Consultores Associados and former Brazilian foreign trade secretary, told BNamericas.

"Another important aspect of this planned issue is that it shows that sustainability obligations are definitely on the Brazilian government's radar," he added. 

According to Varga, the government is working to finalize the framework for sustainable bond issues.

During September, the treasury will hold a presentation for global investors on the framework, including Brazil's commitments in the environmental, social, governance and financial areas.

Some local companies are already active in the field.

"We will increasingly access the international and domestic debt market for sustainable bond issues as an alternative to our funding, as the nature of our business is completely aligned with sustainable practices," Fabiana Ieno Judas, CFO of Brazil’s largest private water and sanitation firm Aegea Saneamento e Participações, told BNamericas.

From 2015 through mid-2023, Brazilian companies issued 215bn reais (US$45.5bn) in ESG-linked bonds through 301 local and international operations, according to figures compiled by NINT, the largest ESG consulting and evaluation firm in Latin America.