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Market and feasibility study for a green bond facility in Latin America

Project Details

CLIENT

KfW

YEAR

2018-2019

COUNTRY / REGION

Argentina, Brazil, Colombia, Mexico, Peru / Latin America & Caribbean

EXPERTISE

Green Finance

Knowledge Transfer

KEY TOPICS

Green Economy Financing

Mitigation & Adaptation Finance

Market Surveys & Feasibility Studies

CONTACT

Carina Dunker

Green bonds, as defined by the Climate Bonds Initiative (CBI) and the International Capital Markets Association (ICMA), are a promising new asset class for financing climate friendly investments through fixed income products. They can issued by companies, financial institutions, or national/sub-national governments. The German development bank KfW contracted IPC and its partner firm, responsAbility Investments, to assess the potential of green bonds in five key Latin American markets: Argentina, Brazil, Colombia, Mexico and Peru.

The purpose of the study was to identify both the constraints and potential for growth in these new green bond markets with a view to potentially establishing a dedicated public-private green bond investment fund. Alongside the market assessment, therefore, IPC also proposed an appropriate design for such a green bond fund.

The IPC consortium:

  • assessed the volume, structure and key stakeholders for past green bond issuances in Latin America and in each country;
  • interviewed investors, issuers, and other stakeholders, with the goal of identifying a portfolio of public and private projects potentially fundable by green bonds over the short and medium term;
  • identified both a pipeline of potential green bonds and the volume of investment that could potentially be financed by green bonds in Latin America over the upcoming 2-4 years;
  • isolated the financial, technical and regulatory challenges, as well as potential risks, affecting the development of healthy green bond markets in the countries analysed;
  • identified regional and national initiatives that may support the promotion of a green bond market, along with potential technical assistance needs; and
  • recommended the appropriate structures and activities for both a technical assistance facility and a potential green bond fund.

 

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