Brazil Readies Roadshow for First ESG Bond Tied to UN Goals

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(Bloomberg) -- Brazil’s first-ever sustainable bond sale will target several green and social initiatives linked to the United Nations 2030 sustainable agenda.

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Brazil published on Tuesday a framework for ESG debt that defines eligibility criteria for such bonds in 17 areas, including pollution control, renewable energy, clean transportation, the fight against deforestation and adaptation to climate change.

Treasury Secretary Rogerio Ceron said the sale will take place after a road show in mid-September. The terms of the bonds are still being discussed, including the exact offer timing and size, he added.

The offering — which has been anticipated for years — follows President Luiz Inacio Lula da Silva’s efforts to prioritize the environment in his administration, a contrast with policies enacted by former leader Jair Bolsonaro. The government is working to deliver on a major environmental and social agenda, including a broader green transition plan meant to help the country reach CO2 neutrality by 2050.

“Our main motivation is to show the country’s commitment to a sustainable agenda,” Ceron said in an interview, adding he expects demand to be high.

Read More: World Bank Floats New ESG Bond Format to Protect Brazil’s Amazon

Goals and Credibility

Brazil’s ESG framework differs from that adopted by other countries including Chile and Uruguay, whose “sustainability-linked bonds” are tied to targets for specific projects. Failure to meet them increase the interest paid by the bonds.

Brazil, instead, opted for showing commitment to a broader range of environmental and social goals, with no financial penalty for missing them.

“The country loses credibility if it doesn’t meet the goals,” Ceron said. “That would hurt future issuance and would make this bond just like any other.”

Treasury officials are planning an investor roadshow by Sept. 11, while Lula heads to New York for the United Nations General Assembly. Following those meetings, the bond issuance could happen at any time, Ceron said.

The new bond’s maturity will not be too long and the amount issued will be substantial, Ceron said. Brazil’s international sales are usually above $1 billion. Yields for sustainable bonds tend to be lower, but that is not Brazil’s main goal, he added.

Global ESG debt swelled to more than $5 trillion in the first quarter of this year, and is expected to continue expanding, according to data compiled by Bloomberg.

--With assistance from Daniel Carvalho.

(Updates with details of Brazil’s ESG framework, in comparison with other countries.)

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