The Latin America SLB market is almost four years old: Brazilian pulp and paper company Suzano debuted in this market in 2020. Since then, SLBs have become the most used sustainable debt instruments in the cross-border market for issuers in the region, according to data compiled by REDD Research.
Issuers from the region have also innovated in that space, with the governments of Chile and Uruguay selling the world's first sovereign SLBs in March and October 2022, respectively. Chile is now issued SLBs denominated in USD, EUR and local currency with both environmental and social targets.
And Uruguay's SLB introduced a two-way pricing mechanism by which issuers not only face coupon step-ups for missing targets but can also see intereste rate step-downs for outperforming their targets.
The amount outstanding of international SLBs in Latin America reached USD 26bn as of May 2024, with Brazilian companies and the Chilean government dominating issuance at 31% and 30% of the total, respectively, as per REDD Research. Mexican corporates accounted for 24%.
Like elsewhere in the world, the Latin American cross-border SLB market saw significant growth in 2021, reaching USD 11.76bn in issuances, from only USD 2bn in 2020. The figure saw consecutive drops in 2022 and 2023, when sovereigns dominated issuance. So far in 2024, only two issuers - Brazilian cement producer Votorantim Cimentos and Chilean forestry products company Empresas EMPC - have sold SLBs for a combined USD 1bn.
When analyzing the performance of KPI’s, as of May 2024, REDD Research found:
four are behind schedule (Suzano Women in Leadership Position and GHG Emissions Intensity)
five in progress (Rumo - GHG Emissions Intensity, Republica de Chile – Women in Leadership Position, Klabin – Reinforcement of Wild Species, JBS – GHG Emissions Intensity and Globo – Absolute GHG Emissions), and
six ahead of schedule (Suzano – Industrial Water Withdrawal Intensity, Republica de Chile – Share of Non-Conventional Renewable Energy and Absolute GHG Emissions, Nemak – GHG Emissions Intensity, Metalsa – GHG Emissions Intensity, Iochepe-Maxion – GHG Emissions Intensity).
four have already delivered on their sustainability targets (Orbia, Movida, Klabin and Grupo ICE).
Most of the KPI trigger event dates are on 31 Dec 2025.
Notably, KPIs related to GHG emissions are by far the most chosen indicator among the issuers, followed by Women in Leadership Positions.
The full report can be read here. Please reach out in case you would like to access similar content.
Comments