Opportunities for green bonds in LatAm infrastructure

Latin America’s green bond market will have to look further than just the energy transition in the battle to mitigate climate change, and infrastructure and agriculture offer new opportunities for issuers, experts argue.

“Climate change, and its substantial effects on the economy and society, is now a given. So we now also have to prepare to make our economies more resilient,” the CEO of the Climate Bonds Initiative, Sean Kidney, said during a green bond webinar hosted by the Chile Pacific Foundation. 

In the specific case of Chile, he said that there is a major opportunity in water infrastructure, as the country is dealing with a 13-year drought.

When asked by BNamericas whether transport infrastructure also represented an opportunity, he said that it depended on the mode of transportation. 

“Transport infrastructure definitely qualifies [for green bond financing], but only if it's low on carbon. Roads no, rail yes,” he said.

While CBI only has figures up to the first half of 2021, these show that the sustainable debt market in Latin America reached US$48.6bn in that period, including US$30.2bn in green bond operations from 91 issuers in 12 countries. 

Chile, Mexico and Brazil are seen as the region’s main players in sustainable financing, while Ecuador and Panama are among the newcomers. In terms of sustainable and green bond issuances in the region, sovereigns account for the bulk, with sub-sovereigns and corporates seen as having strong growth potential.

However, Kidney said that some of the challenges to growth in this segment include a lack of specific taxonomy for sustainable financing and insufficient incentives for issuers. 

The Chilean government has used proceeds from green and sustainable bond issues for energy projects, including clean transport initiatives, according to Carola Moreno, finance and international affairs manager at the finance ministry.

“There are projects worth US$10.3bn that have been evaluated, and a large portion of them have already received funds from green bond issues,” she said when consulted by BNamericas.

According to Moreno’s presentation in the webinar, Chile’s green portfolio (Certified by CBI) also has US$43mn in renewable energy initiatives, US$456mn in green buildings and US$17mn in water management.

On the private sector side, Chilean bank BCI has financed projects with positive impacts on the environment worth 137bn pesos (US$161mn) over the past two years, though mostly in the energy sector, according to Felipe González, BCI’s head of corporate finance. 

When BNamericas asked him whether the bank is exploring environmentally positive projects in other sectors, he said that the food sector is one they are assessing.

“We see industries such as supermarkets that are installing solar panels on their rooftops or agriculture firms that are investing in new technologies to have enough water and energy. We initially started out with electromobility and renewable energy, but we’re expanding to all sectors where we see opportunities for this type of investment,” he said.