The green bond market, still developing in Brazil, has growth potential. According to the latest data from the Inter-American Development Bank (IDB), the issuance of thematic debt securities, the so-called “green, social or sustainable bonds”, totalled $328 billion worldwide last year, 57% more than in 2018. But Latin America and the Caribbean accounted for only 2% of that total.
Created to promote sustainable financing in the country, the Financial Innovation Lab (LAB) conducted a survey of potential issuers and investors to understand the incentives and opportunities needed to participate in this market.
From the issuers perspective, 4.6% cited a better price as a factor. Changes in regulatory frameworks, for example, will make more assets available. On the investor side, green bonds should be more attractively and competitively priced (6.43%). Investors are interested in sustainability, but still see their investment decision linked to risk-adjusted returns and liquidity.
The lack of knowledge of both the market and the destination of resources is one of the biggest barriers to the entry of new players into the thematic bonds market, according to IDB finance specialist Maria Netto. In view of the need for greater transparency, given that 47% of bond issuers in Latin America still do not report on the destination of funds raised and the impact of projects, the IDB has created a platform for transparency on these assets.