Environmental Finance's Bond Awards 2023

Sustainability-linked bond of the year: Republic of Chile

In March 2022, the Republic of Chile issued a $2 billion, 20-year sustainability-linked bond (SLB). This transaction marked not only the first SLB for Chile, but also the first SLB issued by a sovereign.

Chile's issuance is linked to Sustainability Performance Targets (SPTs) for reducing absolute greenhouse gas emissions and achieving half of its electric power generation from Non-Conventional Renewable Energy sources (NCRE) over the next six years, increasing to 60% by 2032, as outlined by its Sustainability-Linked Bond Framework.

If all SPTs are met, the coupon price is unchanged at maturity. If either the emissions or electric power generation SPTs are missed, a 12.5 basis points (bps) coupon step-up will incur. If both targets are missed, a 25bps coupon step-up will take place.

The SPTs are aligned with the Sustainability-Linked Bond Principles and Chile's sustainability goals, established under Chile's Long-Term Climate Strategy (LTCS).

With the issuance, Chile became the first government to link its official Nationally Determined Contribution (NDC) commitment on climate change to a bond issuance.

Chile will publish a report annually containing an explanation of the main factors behind the evolution of the KPIs.

One Bond Awards judge called it a "landmark issuance from a sovereign issuer who has demonstrated leadership in sustainable debt".

Patricio Sepulveda, head of public credit at the Chilean Ministry of Finance, commented: "Chile is committed to addressing climate change challenges. Our inaugural SLB is part of these efforts and proves that finance and climate commitments work closely together. We thank Environmental Finance for this award, which we view as a testament to the importance of our efforts".

Deal highlights:

Issuer: Republic of Chile
Size: $2 billion
Maturity: 7 March 2042
Coupon: 4.34%
KPIs: Emissions reductions and renewable energy
External reviewer: Moody's ESG, Sustainalytics
Lead manager: BNP Paribas, Credit Agricole CIB, Société Générale
Credit rating: A (S&P), A2 (Moody's), A- (Fitch)
Other highlights/notable features: Chile was the first country in the Americas to issue green bonds in 2019, followed by its first social bond transaction in 2020, and its inaugural sustainable bond in 2021.