Brazil and the issuance of green bonds

Brasil e as emissões de títulos verdes

In 2021, Brazil totaled BRL 100 billion in green bonds issued. The country grows in emissions, but the model is still not very representative.

Green bonds or green bonds are financial instruments that help compose climate finance with the aim of mitigating the damage caused to the environment due to the use of fossil fuels, deforestation and other anthropic actions.

In 2015, an agreement to combat climate change was signed by 195 countries that committed to intensify actions and investments to stimulate a low-carbon economy.

In addition to direct actions to reduce the global average temperature, countries have also committed to contribute with other actions, such as the use of clean energy, better use of available land and financial investments in causes associated with the maintenance of the environment.

What are green bonds?

Green bonds or green bonds are fixed income securities used to raise funds with the aim of implementing or refinancing projects that have a positive objective from an environmental or climate point of view.

What characterizes them is precisely the allocation of resources or use of proceeds. That is, the money raised is stamped and can only be allocated to the specific project that was declared by the company or government at the time of issuance.

Those eligible for the issuance of bonds are called green projects and are important alternatives to finance new technologies, attracting institutional investors, such as pension and pension funds and insurance companies.

The most common types of projects associated with issuing green bonds are renewable energy, energy efficiency, pollution prevention and control, sustainable agriculture and livestock, and clean transport.

Organizations such as the International Energy Agency, the World Bank and the World Resource Institute (WRI) estimate that the investments needed for the energy transition could reach US$ 5 trillion annually, a volume of resources much greater than is currently invested.

The first issuances of green bonds were carried out by the European Bank in 2007. Since then, the market has experienced broad growth and issuances have already taken place in more than 25 currencies and in dozens of countries. The benefits of this type of investment is that it brings diversification to investors and brings reputational gain. In addition, it provides transparency to the resources invested and converges with government objectives in mitigating negative environmental impacts.

Green bonds and issues in Brazil

Among the numbers of green bond issues, Brazil is responsible for 30.7% of the total values ​​of Latin American countries. In the Brazilian market, the options for fixed income securities available, such as CRI, CRA, financial bills, promissory notes and debentures may have their environmental additionality or climate benefit recognized. Therefore, the country has great growth potential.

In 2021, issuances of green bonds grew exponentially in Brazil, reaching R$100 billion. However, for market experts, the sector can still grow much more, as there was a delay in the start of investments. Thus, other Latin American countries such as Chile and Colombia are already more developed.

In the country, in the last two years, there has been a predominance of emissions linked to Brazil’s sustainability goals, just as the pandemic was an important driver for greater ESG investment. Although it is a bond that has the same interest as the others, social bonds carry the reputational benefit, which allows accessing new markets and investors.

Therefore, national and international figures reveal that more and more resources are being raised to finance green projects or to catalyze the ESG agenda of companies. It is now up to the government and investors to turn their attention to such an important and profitable asset. And you, what do you think about the theme? Do you think it’s a good investment?


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