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Chile to test viability of sovereign sustainability

The first sovereign sustainability-linked bond has been announced, and it is no surprise that it is coming from Latin America. Investors and bankers will follow Chile’s transaction carefully, but is the issuer’s decision to enter war-spooked markets a sign of confidence or recklessness?

Photo: iStock

Rumours that a Latin American sovereign would be the first to test the sustainability-linked bond (SLB) structure became reality on Tuesday. Chile announced it would begin three days of marketing meetings, before aiming to price dollar- and euro-denominated tranches next week.

One of the bankers involved in the dual-currency deal – which is being led by a French syndicate of BNP Paribas, Crédit Agricole and Societe Generale – was understandably cautious about making any specific predictions when speaking to Euromoney on the day of the launch, given that Russian tanks were entering Ukrainian territory, but the confidence of the syndicate seems high.

“We have three days of marketing ahead and then, after that, there’ll be advice based on that investor feedback, whether and how to proceed,” he told Euromoney. "But the target is potentially to issue both in dollars and euros on the basis of two key performance indicators (KPIs): one linked to a reduction in carbon emissions and another related to increasing the proportion of non-traditional renewable power going into the national grid."

A lot of governments are uncomfortable with KPIs
Chris Gilfond, Citi

Chile’s first KPI target is to reduce its absolute greenhouse gas emissions to 95 million tonnes of carbon dioxide-equivalent by 2030.

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