Year: 2021

Winner: CLP 1.6 Trillion Debt Offering

Chile’s credentials as a world-class sovereign issuer need little introduction. But its consistency as a trailblazer in sustainable financing sets it apart – and not only in the region.

Despite a turbulent political backdrop over the past two years, the Republic has been able to issue social and sustainable bonds to rapturous investor response.

Its efforts have helped extend the range of its sustainable bond program to other parts of its ESG agenda – and in doing so, replicating in other areas the experience of its green bond program that made the country a pioneer in ESG-themed sovereign deals back in 2019.

“We have used the money to finance renewable energy projects, green buildings, clean public transportation and the management of water resources,” Rodrigo Cerda, Chile’s outgoing finance minister tells LatinFinance. “Those are subjects that have been very well received by investors and have enabled us to pay favorable interest rates.”

By adding social and sustainable notes to its issuance portfolio over the past year, Chile has taken the total value of its ESG debt from the $7.7 billion of its original green bond program to $31 billion over the past three years, Cerda says.

With a view to raising funds to support Covid-19 mitigation measures alongside ongoing commitments to foster a green economy, Chile began 2021 with a $4.25 billion sustainable issuance, mixing both social and green bonds in euros and dollars. It included €1.25 billion of new 30-year notes and $1.5 billion of new bonds due 2061.

In July of last year, Chile placed €1.75 billion in social bonds in two tranches, paying a 0.1% coupon for the 5-year tranche and 1.3% for the 7-year notes. In the same month, it issued a further $3.75 billion in US dollars, with durations between 12 and 40 years and coupons ranging from 2.55% and 3.1%.

Then in September, the country issued $2.1 billion in social bonds in euros and dollars, in a deal that included a 50-year, $1 billion tranche that offered a coupon of 3.25%. The 7-year, €918 million tranche paid 0.555%.

Cerda notes that Chile has taken extra care in reporting how the money raised with green and social bonds is used in order to keep the pipeline of placements moving.

“Transparency has helped to keep investors’ interest in our bonds,” he says.

Before all those deals, in December 2020, the finance ministry had already innovated by launching a CLP1.6 trillion placement of 8-year and 13-year social notes in the domestic market. It was the first time that sustainable bonds were offered by the Republic of Chile to domestic investors. That transaction wins LatinFinance’s Local Currency Deal of the Year award.

“We wanted to introduce those concepts in the domestic market, and it worked quite well,” Cerda says. “We will surely make new green, social and sustainable bond placements in Chile, but it is natural that most of the issuances will still be placed in international markets.” – LF