Opportunity knocks for ESG in Latin America

The region’s financing programmes put environmental and social commitments at the forefront.


Throughout Latin America, corporations and institutions are increasingly adopting vigorous sustainability policies and practices, reflecting in part the severe economic duress arising from the Covid-19 pandemic and the impact of climate change. The uptick in environmental, social and governance (ESG) activity in Chile, Mexico, Argentina and neighbouring countries has driven demand for innovative financing, ranging from sustainability-linked loans and bonds (SLLs and SLBs) to social and green bonds and related solutions.

A financing first in Chile

CMPC, a Chile-based global leader in the forestry, pulp, paper and packaging industries, has long been a regional pioneer in sustainable finance, entering into Chile’s first sustainability-linked revolving credit facility (RCF) last autumn. The company continued its trailblazing path in late March/early April as it launched a US$500m, 10-year sustainability-linked bond (SLB), its first such issue and the first in Chile. The SLB is based off the company’s new sustainability-linked bond framework and links CMPC’s performance to two of its four publicly-stated environmental sustainability goals with specific sustainability performance targets:

  • Greenhouse gas emissions: 23.5% reduction of its CO2 emissions by 2025;
  • Industrial water use intensity: 25% reduction in industrial water use by 2030 (from a 2018 baseline).

CMPC’s strategic sustainability approach has been developed in the spirit of its corporate purpose – Conserve, Create and Coexist. With this issuance, the company is reinforcing its commitment with a business model that effectively addresses climate-related risks.

“The market’s good reception for our issuance, with a historical rate for CMPC, reflects the confidence of investors in our company. It is another important step in our commitment to continue advancing in initiatives related to sustainable finance,” said Ignacio Goldsack, Chief Financial Officer at CMPC. 

“CMPC’s transaction highlights the momentum of sustainable finance in Latin America with key corporates,” said Walter Ringwald, Head of Corporate Coverage for Latin America at BNP Paribas. “Using science-based KPIs for sustainable finance instruments helps drive true impact in the decarbonisation of key sectors across the region, while also supporting the transition to a more sustainable economy in the communities in which these firms operate.”

Spanning green & social bonds

Latin America’s largest e-business by market cap, e-commerce tech provider Mercado Libre, put societal and environmental issues front and centre with its inaugural US$1.1bn debt issue in January. The initiative features both 10-year refinancing and 5-year sustainable financing notes for eligible environmental and social projects, including financing/lines of credit to micro businesses in countries like Brazil, Mexico and Argentina; third-party financing for battery-powered vehicle and charging-station development; and teaming up with conservation experts to help regenerate biomes.

In Latin America, the focus on sustainable strategies is not limited to corporates. In the past two years alone, the Republic of Chile has issued over $14bn in multicurrency ESG bonds across euros, dollars and pesos. In late January, the country made available US$4.25bn in green and social bonds in dollars and euros, the first cross-border, dual-currency, dual-label issuance under Chile’s sustainable bond framework. At a mere 0.83%, the EUR offering is the lowest-yielding green bond ever printed by the Republic.


Using science-based KPIs for sustainable finance instruments helps drive true impact in the decarbonisation of key sectors across the region

Walter Ringwald, Head of Corporate Coverage for Latin America, BNP Paribas

To help realise the goal of non-carbon public transportation over the next 20 years, a portion of the funding will help support domestic energy-efficient projects, such as the clean transportation initiatives developed by the Ministry of Transportation working hand in hand with the Ministry of Environment. This comes on the heels of a US$130m, 10-year amortising senior secured green loan that will help the city of Santiago replace its diesel-powered bus fleet with new electric models. The financing will also help underwrite social endeavours such as low-income housing, access to education, food security and essential health services.

In January, IDB Invest (the private-sector arm of Inter-American Development Bank Group) debuted its Sustainable Debt Securities programme, using a first-of-its-kind sustainability debt framework for issuing green, social and sustainability bonds, as well as other debt securities. Totalling US$1bn, the five-year offering is designed to promote economic relief throughout Latin America, while also providing investors with greater transparency through fully integrated reporting covering both societal and environmental factors. Areas earmarked for funding include improving access to essential services, socio-economic advancement, sustainable food systems, water and wastewater management, and clean transportation.

Lending a hand

In Latin America as elsewhere, demand and enthusiasm for ESG-related financing continues its upward momentum. In the years ahead, institutions and companies that have the resources and strong regional presence will play a pivotal role in expanding the parameters of sustainable finance. This in turn will help an even wider range of industries to successfully integrate policies and practices that will accelerate their sustainability journeys and help build a better future.

Sustainability Surge in Latin America

As the leading bank for sustainable finance globally and in Latin America, BNP Paribas remains committed to helping corporations and governments assume greater responsibility through customised financing in support of ESG causes. In Latin America, some recent transactions include:

CMPC (March 2021): Joint Bookrunner, Global Coordinator and Co-Sustainability Coordinator for a US$500m, 10-year inaugural sustainability-linked bond (SLB); Joint Lead Arranger, Sole Sustainability Coordinator and administrative agent for $US100 million syndicated revolving credit facility (RCF) structured as an SLL

IDB Invest (February 2021): Joint Bookrunner for the US$1bn sustainability bond issue on behalf of the private sector arm of the Inter-American Development Bank Group; Co-Arranger in a US$184mn A/B zero-coupon true sale purchase of credit rights owned by electricity generation companies against distribution companies (the Chilean stabilization fund), whose repayment is enabled by an increased share of renewables.

Republic of Chile (January 2021): Joint Lead Bookrunner for the government’s US$4.25bn multi-currency, multi-tranche green and social bond offering
Mercado Libre (January 2021): Sustainability Coordinator and an Active Bookrunner for the tech giant’s recent US$1.1bn debt issue

Suzano (February 2021, September 2020): Joint Lead Arranger, Sole Sustainability Coordinator and Administrative Agent for US$1.6bn syndicated senior unsecured export prepayment term loan structured as an sustainability linked loan (February 2021); Global Coordinator for a US$750m, 10-year inaugural sustainability-linked bond (September 2020).

CEMEX (October 2020): Mandated Lead Arranger and Sole Sustainability Coordinator for a US$3.2bn sustainability linked loan to Mexico’s leading cement manufacturer

United Mexican States (September 2020): Lead Joint Bookrunner for Mexico’s 7-Year, €750 million sovereign Sustainable Development Goals Bond, the first of its kind in the world.