By Marcela Ayres
BRASILIA (Reuters) -Brazil raised $2 billion on Monday with its first-ever ‘green’ bond issuance, part of an effort to set a benchmark for the private market while channeling funds toward the government’s ambitious sustainability agenda.
The seven-year bonds featured a 6.5% yield, said Finance Minister Fernando Haddad, confirming details reported earlier by Reuters.
Speaking to reporters, Haddad described the outcome as “quite significant,” emphasizing that the spread of the operation was comparable to those obtained by investment-grade countries.
Demand for the bond far outstripped its volume, with the order book nearing $6 billion, the Treasury said in a statement.
The final allocation saw substantial participation from non-resident investors, it added, with approximately 75% originating from Europe and North America, while Latin America, including Brazil, accounted for the remaining 25%.
A source familiar with the operation, who had spoken on condition of anonymity, stressed that the spread was much lower than what the government got for its conventional $2.25 billion issuance in April.
“At this rate of 6.5%, we are trading only 15 points above … a Mexican bond, which is investment-grade,” said the source.
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 ratings agency Fitch upgraded Brazil’s credit rating in July and S&P improved its outlook for the country in June, the country has yet to reclaim its coveted investment-grade rating.
Brazil’s Treasury announced earlier on Monday that the environment, sustainability and governance (ESG)-linked bonds, maturing in 2031, would be issued in dollars, and the outcome would be disclosed at the end of the day.
The operation was led by banks Itau BBA, JPMorgan and Santander.
In late August, the Finance Ministry’s executive secretary Dario Durigan said the government was gearing up to issue “something around $2 billion” that was intended to serve as the financing base for Lula’s ambitious ecological transition plan.
Government officials have indicated that the proceeds from the operation would primarily bolster the so-called Climate Fund under the oversight of state development bank BNDES.
Leftist Lula, who took office in January, has been trying to improve Brazil’s environmental track record.
His green plan also involves the establishment of a regulated carbon credit market, part of a wider push to attract investment to Latin America’s largest economy.
(Reporting by Marcela Ayres; Editing by Jan Harvey, Chizu Nomiyama and Josie Kao)