BRASILIA, Nov 13 (Reuters) – Brazil raised $2 billion on Monday in its first-ever issuance of ‘green’ bonds, part of an effort to set a benchmark for the private market while channeling money into its ambitious sustainability agenda from the government.
The seven-year bonds had a yield of 6.5%, said Finance Minister Fernando Haddad, who confirmed details previously reported by Reuters.
Speaking to reporters, Haddad described the outcome as “quite significant”, stressing that the spread of the operation was comparable to that of countries with good investment quality.
Demand for the bond far exceeded volume, with the order book approaching $6 billion, the Treasury Department said in a statement.
The final allocation saw significant participation from non-resident investors, the report added, with around 75% coming from Europe and North America, while Latin America, including Brazil, accounted for the remaining 25%.
A source familiar with the operation, who spoke on condition of anonymity, stressed that the spread was much lower than what the government got for its $2.25 billion conventional issue in April.
“At this rate of 6.5%, we are trading just 15 points above… a Mexican bond, which is investment grade,” the source said.
By early 2016, Brazil had lost all its investment-grade scores after a deep economic recession and political crisis at the end of a global commodity boom.
Although rating agency Fitch upgraded Brazil’s credit rating in July and S&P upgraded its outlook for the country in June, the country has not yet regained its coveted investment-grade rating.
Brazil’s finance ministry announced earlier on Monday that the environmental, sustainability and governance (ESG)-linked bonds, which mature in 2031, would be issued in dollars, with the outcome announced at the end of the day.
The operation was led by the banks Itau BBA, JPMorgan and Santander.
In late August, Treasury Department Executive Secretary Dario Durigan said the government was preparing to spend “something around $2 billion” intended to provide a financing base for Lula’s ambitious ecological transition plan.
Government officials have indicated that proceeds from the operation would primarily support the so-called Climate Fund, which is overseen by state development bank BNDES.
Left-wing Lula, who took office in January, is trying to improve Brazil’s environmental record.
His green plan also includes the creation of a regulated carbon credit market, part of a broader effort to attract investment in Latin America’s largest economy.