Brazil prices $2 billion first-ever ESG bond at 6.5% yield -source By Reuters

By Marcela Ayres

BRASILIA (Reuters) – Brazil raised $2 billion on Monday with its first-ever ‘green’ bond issuance, featuring a 6.15% yield, according to a person familiar with the operation.

The seven-year bonds are part of an effort to set a benchmark for the private market while channeling funds toward the government’s ambitious sustainability agenda.

According to the source, who spoke on condition of anonymity as the details of the deal are not yet public, the spread of the issuance was much lower than what the government got for its conventional $2.25 billion issuance in April.

“At this rate of 6.5%, we are trading only 15 points above … a Mexican bond, which is investment-grade,” said the source.

Brazil lost its investment-grade status in 2016 after a deep economic recession and political crisis at the end of a global commodity boom.

Although ratings agency Fitch upgraded Brazil’s credit rating in July and S&P improved its outlook for the country in June, the country has yet to reclaim its coveted investment-grade rating.

Brazil’s Treasury announced earlier on Monday that the environment, sustainability and governance (ESG)-linked bonds, maturing in 2031, would be issued in dollars, and the outcome would be disclosed at the end of the day.

The operation was led by banks Itaú BBA, JPMorgan and Santander (BME:).

In late August the Finance Ministry’s executive secretary Dario Durigan said the government was gearing up to issue “something around $2 billion” that was intended to serve as the financing base for Lula’s ambitious ecological transition plan.

Government officials have indicated that the proceeds from the operation would primarily bolster the so-called Climate Fund under the oversight of state development bank BNDES.

Leftist Lula, who took office in January, has been actively engaging in efforts to improve Brazil’s environmental track record.

His green plan also involves the establishment of a regulated carbon credit market, part of a wider push to attract investment to Latin America’s largest economy.