Social bond of the year - sovereign: Republic of Chile

Prolific sustainable bond issuer Chile scooped the sovereign social bond of the year award after securing the lowest coupon for a Latin American sovereign ever, as part of a mammoth $5.8 billion multi-currency social bond issuance in July 2021.

Chile raised €1.75 billion from euro-denominated and $3.75 billion from US dollar-denominated social bonds in a series of transactions in late July. These transactions included a €1 billion social bond due in January 2027, which saw investor demand reach more than four-and-a-half times the offer amount and secured a 0.1% coupon – which Chile said is the lowest of any Latin American sovereign fixed income issuance to date.

The five social bond transactions completed in July were undertaken to raise funds for the Covid-19 emergency fund created by the country and almost doubled the total amount that Chile had raised through social bonds. According to Environmental Finance Data, prior to these transactions Chile had raised $7 billion in total from social bonds since it first issued in November 2020.

One judge praised the "excellent" social bond framework under which the bonds were issued, in particular the transparency and disclosure commitments made through its impact reporting.

The judges also said the huge social bond transactions helped cement the position of Chile as a leading sovereign sustainable bond issuer, especially in Latin America. Since it issued its first green bond in 2019, Chile has raised more than $33 billion through social, sustainability and sustainability-linked bonds – the only sovereign to utilise all the main sustainable bond types.

"Its market presence has been important in developing this market domestically and internationally, and its programme serves as an important benchmark for LatAm and other sovereigns in the Americas," one judge said.

The Chile finance ministry told Environmental Finance it intends to issue more sustainable bonds in local currency to support the development of the domestic market which is still adapting to include these thematic bond instruments.

“During the last year, we have issued social bonds denominated in local currency – but the participation of thematic bonds in the local curves is not as important as it is in the external bonds,” a spokesperson said. “Nonetheless, our plan is to further expand the participation of [sovereign] sustainable bonds in the local market – increasing the participation and generating benchmarks for the [domestic private] sector.”

Deal Highlights

Issuer: Republic of Chile
Size: €1 billion; €750 million; $2.25 billion; $1 billion; $500 million
Maturity: January 2027; July 2036; July 2033; May 2041; January 2061
Coupon: 7%
Settlement date: 0.1%; 1.3%; 2.55%; 3.1%; 3.1%
Use of Proceeds: Access to essential services; Affordable Housing; Covid-19 Response; Employment generation, including through the potential effect of SME financing and microfinance; Food security; Socioeconomic advancement and empowerment
Lead managers: BNP Paribas; Citi; Goldman Sachs; Santander; Scotiabank; JP Morgan
External Reviewer: Moody’s ESG Solutions
Credit rating: Moody's (A1); S&P Global (A+); Fitch (A-)