The international green bonds market has been developing rapidly since the first issuances by the European Development Bank and the World Bank in 2007 and 2008, respectively. With these "green bonds", companies, investment banks, and governments raise funds to finance or refinance projects or assets with positive environmental or climatic impacts. The bonds issued may take the form of any debt securities, such as debentures, notes, and financial bills. The only difference relates to the allocation of funds.

According to the Climate Bonds Initiative, an international organization that promotes the bond market for investments in climate change solutions, green bond issuances totaled US$ 81 billion in 2016. For this year, the estimate is that they will total US$ 150 billion. Brazil already participates in this market. The first issuance of green bonds by a Brazilian company was done in 2015, when BRF raised 500 million euros. In the local market, the issuance of agribusiness receivables certificates backed by export credit notes issued by Suzano Papel e Celulose in November of 2016 is considered the first transaction. In May of this year, another milestone was the first issuance of green bonds by a Brazilian bank abroad, conducted by BNDES. The funds raised totaled US$ 1 billion, with a demand of US$ 5 billion.

The figures show Brazil's enormous potential for developing green projects and the green bond market. In 2017, some companies, especially in the renewable energy sector, have been preparing certified issuances such as green bonds and climate bonds. These developments are important both for the financial and capital markets and for the evolution of socio-environmental concepts adopted by Brazilian companies. They also create new opportunities for investors to participate in sustainable projects in Brazil.


Improvement of the market

One of the milestones in the evolution of the international market for green bonds was the publication in January of 2014 of the Green Bond Principles, general issuance guidelines (such as transparency and disclosure standards) prepared jointly by a group of financial institutions. One of the objectives of these recommendations is to ensure the actual investment of funds raised in green projects and adequate disclosure.

Because there is no specific regulatory authority (or even specific rules) for classifying an instrument as a green bond, the rules applicable to the issuance of such securities, including their classification, are defined by the issuers themselves. One of the main concerns of investors is, therefore, to confirm the socio-environmental characteristics of the projects and their “green” classification. To achieve this goal, independent companies are engaged to certify the project and monitor the deployment of the funds during the term of the transaction.

Issuers are not required to link funds to a single project. The corresponding risk for investors is to lose control over what they are financing and how much is allocated to each project. As a way of protecting themselves, investors require periodic disclosure with respect to the allocation of funds raised and the progress of projects.

In Brazil, important initiatives have been taken to develop the green bond market. In October of 2016, Febraban (Brazilian Federation of Banks) and CEBDS (Brazilian Business Council for Sustainable Development) published the Guide for the Issuance of Green Securities in Brazil, which provided recommended practices and procedures for Brazilian-issued green bonds.

In December of 2016, BNDES and the Climate Bonds Initiative announced a partnership to create the Sustainable Energy Fund, which will invest in debentures to finance projects in the energy sector, subject to certain sustainability requirements to be defined. In March of this year, BNDES selected Vinci Partners as the fund manager, which will have an equity of R$ 500 million and a term of 15 years.

Another action that is worth highlighting is the bill of law under analysis in the Senate to include projects aimed at sustainable development among the list of those projects considered priority under Law No. 12,431/2011. With this amendment to the text of the law, green projects would be recognized in advance by the competent public authorities as priority and sustainable, and debenture issuances to finance them would enjoy the tax benefits provided by that legislation.

The main challenges in the Brazilian market continues to be low liquidity and concentration of funds/resources in fixed income investments. It is expected that initiatives such as those sponsored by BNDES and the structuring of innovative transactions will lead to a more mature market and help unlock its untapped potential.