05/25/2024 – 13:16
Expected to take place in the coming months, Brazil’s second issuance of sustainable sovereign bonds on the international market will finance circular economy and sanitation projects not included in the first launch. The National Treasury included the segments in the Pre-Issuance Report, released last Friday (24).
The document repeated last year’s total limits, according to which environmental projects will receive 50% to 60% of the resources raised abroad. Social projects will have the remaining 40% to 50%. However, the internal distribution of activities to be financed has changed in relation to the first issuance of green bondswhich took place in November last year on the New York Stock Exchange.
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The Treasury announced the distribution of the money to be raised in the foreign market. The report does not present estimates of how much it intends to raise by issuing securities on the foreign market, but the ministry intends to repeat the US$2 billion, around US$10 billion at current exchange rates, raised in the first operation last year.
According to the Treasury report, the resources obtained from Brazil’s sustainable sovereign bonds will be allocated to projects in nine segments, seven linked to the environmental area and two linked to the social area. The body prepared a distribution estimate for each of these segments, with minimum and maximum sub-limits for dividing resources.
In environmental projects, the distribution will be as follows:
• Renewable energy: 30% to 34%;
• Clean transport: 13% to 17%;
• Control of greenhouse gas emissions: 4% to 5%;
• Adaptation to climate change: 1% to 4%;
• Terrestrial and aquatic biodiversity: 1% to 2%;
• Energy efficiency: 0.5% to 1%;
• Circular economy: 0.5% to 1%;
• Total: 50% to 60%.
In social projects, the sublimits will comply with the following intervals:
• Combating poverty: 36% to 46%;
• Access to basic infrastructure: 4% to 8%;
• Total: 40% to 50%.
Differences
In the first issue on the New York Stock Exchange, in November, priority had been given to clean transport projects (20% to 25%) and renewable energy (15% to 20%), in the environment. The new issuance will include the circular economy segment, not included in the first international launch of green bonds.
In relation to social projects, the maximum percentage of anti-poverty projects fell. In the first issue, the segment had concentrated 30% to 40% of the issue. In return, the Treasury inserted the segment of access to basic infrastructure, which will mainly include sanitation, which will replace food security projects, benefited in last year’s operation.
Rio Grande do Sul
The Treasury reported that, at this moment, the resources obtained from the issuance of green bonds help to finance the reconstruction actions in Rio Grande do Sul already announced by the government. The body, however, highlighted that, if the relationship between the projects and the legislation that regulates the issuance of sustainable bonds is demonstrated, the framework can be revised, with the inclusion of projects.
“There is still not enough information to frame the budgetary expenses resulting from these measures [de ajuda ao Rio Grande do Sul] to the classification of the Brazilian Framework for Sustainable Sovereign Bonds and, therefore, they were not part of the indicative selection of eligible expenditure categories in this report. Going forward, if they prove to adhere to the aforementioned Framework, they may be reported in the allocation of resources raised by sustainable bonds issued by the National Treasury”, highlighted the report.
Sustainable projects
Federal bonds launched abroad, green bonds are linked to commitments to the environment. Instead of receiving mere financial interest, foreign investors would receive the returns from a sustainable project, which would be between 6.15% and 8% per year for bond buyers.
This will be the same National Climate Change Fund rate of returnrelaunched two months ago and which will receive part of the proceeds from the bond issues.
Last Thursday (23), the Secretary of the National Treasury, Rogério Ceron, informed that he is preparing a second issuance of green bonds by the end of the year. “We are preparing a new issue of paper this year which, once again, will provide resources for the Climate Fund,” said Ceron at an event promoted by the Brazilian Association of Infrastructure and Base Industries (Abdib). The date, he said, will depend on the best moment in the international market.
The first issuance of green bonds was delayed. Initially scheduled to take place in September last year, the issuance only took place in November. At the time, the National Treasury managed to raise US$2 billion with interest of 6.5% per year, to be paid upon maturity of the papers.
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