Colombia Plans Green Bond Debut to Pave Way for More Local Sales

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(Bloomberg) — Colombia is set to become the first government in Latin America to sell green bonds in the local market in a debut offering this month, according to a finance ministry official. 

The Andean nation will offer at least 500 billion pesos ($132 million) of securities due in 10 years on Sept. 29, public credit director Cesar Arias said in a video interview. Depending on demand, the government may sell as much as 750 billion pesos, he said.

While Chile has sold green debt overseas since 2019, and many companies have followed suit, offering securities in the Colombian market is a first. The sale in pesos will allow the government to reduce its currency risk as well as help pave the way for other issuers to tap the local market with green offerings, said Arias.    

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“We want to contribute to the development of the Colombian capital market in green offerings,” Arias said. “It is very important that the sovereign with its benchmarking power, provides liquidity” that will help set prices. 

Colombia plans to sell as much as 2 trillion pesos of the bonds, known as green TES, this year, which will fund projects including water management, clean transport and renewable energy, according to Arias. Further auctions will follow next year.

Bond Twin

The green TES will act like a “twin” to the nation’s peso debt due 2031, being subject to the same local regulations, Arias said.

Green bonds typically offer slightly lower rates given strong investor demand for socially conscious investing. The yield on the nation’s fixed-rate peso bonds due 2031 rose to 7.27% on Monday. 

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Helped in part by investor appetite for higher yields, foreigners bought a net 4.1 trillion pesos of the nation’s peso securities in August, according to Arias. The economic recovery and strong backing by lawmakers for the country’s tax bill that is expected to be approved this month also helped, he said. 

That marks a fifth-straight month of net purchases, even after the Andean nation lost its investment grade rating and suffered social unrest earlier this year. 

After selling a net $1.6 billion of bonds in the overseas market in January and $3 billion in April, the country has between $750 million and $1 billion remaining in international debt offerings for this year, according to Arias. 

“We will be very tactical in the remainder of the year,” he said. “Fortunately markets have been behaving very positively, both locally and internationally.”

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