Brazil, as Latin America’s largest economy, has a thriving market for labeled bonds, with a significant portion of green, social, sustainability, and sustainability-linked debt transactions originating from the country. However, the sovereign was notably absent from this market until late last year.
In November, the Brazilian government issued its first sustainable bond, marking its entry into the market. Local corporates had already made significant strides in both domestic and international issuance of GSSS notes, as had other sovereigns in the region. This move by the government has set the stage for Brazilian issuers to play a more significant role in the market.
The sovereign’s presence in the labeled bond market has helped shape the yield curve, providing a benchmark and boosting market volume. The issuance attracted a diverse base of investors and serves as a launch-pad for the country’s wider sustainable taxonomy.
The Brazilian government has been transparent about how funds raised from GSSS bond sales will be used, with a focus on impact and transparency. The issuance is part of the Ecological Transformation Plan, which includes initiatives like establishing a carbon emission trading system and adopting corporate disclosure standards for accessing capital markets.
While Brazil is a late-comer in developing a national sustainable finance taxonomy compared to other countries in the region, the government is set to start a public consultation on this matter in November. The work done on the sovereign bond issuance has paved the way for this taxonomy development, providing a good starting point for future initiatives.