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Chile becomes the first country in the world to issue a Sustainability Linked Bond
03/02/2022 Since 2 years

Chile makes historic US$ 2 billion issuance and becomes the first country in the world to issue a Sustainability-Linked Bond.

The Ministry of Finance reports that it made its first sovereign issuance of a sustainability-linked bond (SLB), with remarkable results, despite the difficult times, high volatility and uncertainty in the global economy and markets.

The placement of the new US dollar SLB bond maturing in 2042 was US$2 billion. The operation was very successful in several dimensions.

First, it achieved a high demand of US$8.1 billion, 4.1 times the amount placed of US$2 billion, diversified not only by type of investor but also by geography. This is particularly relevant considering the current difficult global circumstances.

The spread of 200 basis points over the 20-year US Treasury rate is also remarkable, considering an adjustment of 40 basis points from the initial indicative price (IPT), and implies a premium concession of only 15bp, unprecedented at this market juncture. Thus, the final rate reached was 4.346%.

This issuance demonstrates the confidence in the Chilean economy of the international markets, as well as Chile’s leadership in international green finance, being the first country in the world to issue this type of bond.

Over the years, Chile has strengthened its commitment to climate change mitigation and environmental protection through both domestic and international initiatives. The issuance of this SLB bond seeks to set another milestone in the nation’s commitment. In view of the imminent need to move towards a zero net carbon economy by 2050, various ministries, including the Ministry of Finance, have created specialised areas to address climate change, promote public-private cooperation and align incentives in this direction from different stakeholders.

The operation of the SLB reaffirms Chile’s leadership in the thematic bond market, being the first country in the Americas to issue green bonds in 2019 and, since 2020, also expanding the set of debt instruments with the issuance of social bonds and sustainable bonds. In 2022, Chile becomes the first country in the world to issue an SLB. Considering this operation, the equivalent of approximately US$ 33 billion in thematic bonds has been issued since 2019, of which US$ 17.8 billion are social bonds, US$ 7.7 billion are green bonds, US$ 5.5 billion are sustainable bonds and US$ 2 billion are SLBs. With this issuance, thematic bonds represent 28.7% of the stock of central government debt, which is among the largest in the world.