Chile’s Inaugural Sovereign Sustainability-Linked Bond Offering
March 7, 2022
Cleary Gottlieb represented BNP Paribas Securities Corp., Credit Agricole Securities (USA) Inc., and SG Americas Securities LLC, as underwriters, in the Republic of Chile’s (Chile) SEC-registered offering of $2 billion 4.34% sustainability-linked bonds (SLB) due 2042.
The offering of the notes priced on March 2, 2022, and closed on March 7, 2022.
SLBs are a particular type of financial instrument designed to motivate issuers to meet ambitious sustainability targets, which are measured by key performance indicators (KPIs). Unlike green bonds and other sustainability-labeled bonds, the proceedings of these instruments are not directed to specific projects but the bond coupons are linked to the achievement of the predetermined sustainability targets. If a target is missed, the issuer will be subject to a financial penalty, usually in the form of a higher coupon.
The climate change targets contemplated by Chile’s SLB include complying with two maximum CO2 emission targets in line with Chile’s commitments under the Paris Agreement and reaching 60% of electricity production through non-conventional renewable energies by 2032.
In the midst of the international crisis involving Ukraine and the resulting volatile and uncertainty in the global economy and financial markets, Chile achieved a historic milestone by being the first sovereign to issue an SLB.