Ministry of Finance publishes its Sustainability-Linked Bond Framework
Santiago, February 22nd, 2022. After receiving a favorable Second Party Opinion, the Ministry of Finance (MoF) published its inaugural Sustainability-Linked Bond Framework (SLB Framework), laying the groundwork for the issuance of Chile’s first sovereign Sustainability-Linked bonds.
Through this Sustainability-Linked Bond Framework (SLB Framework), the MoF, in cooperation with the Ministry of Environment (MoE), is further expanding its commitment to sustainable development. This SLB Framework, in conjunction with Chile’s existing Sustainable Bond Framework (2020), will provide clear and transparent information to the market related to all future Green, Social, Sustainable, and Sustainability-Linked Bonds (SLBs).
SLBs are a particular type of financial instrument designed to incentivize the borrower’s achievement of ambitious, predetermined, sustainability performance objectives, measured using key performance indicators (KPIs). Unlike green and other sustainability-labeled bonds, these instruments are not related for particular projects or spending; rather, the coupons are linked to KPIs and target achievement. If a target is missed, there were will be a financial penalty for the Issuer, that generally takes the form of a step-up coupon.
Through the issuance of SLBs, Chile intends to leverage ambitious timelines to achieve strong sustainable outcomes that are relevant, core and material to Chile and the Chilean people. Chile expects that the issuance of its SLBs will build upon Chile’s prior Green, Social, and Sustainable bond issuances and inspire other countries and companies to do the same.
This SLB Framework is aligned with ICMA's Sustainability-Linked Bond Principles published in June 2020, complying with the five core components outlined therein:
1. Selection of Key Performance Indicators (KPIs);
2. Calibration of Sustainability Performance Targets (SPTs);
3. Bond characteristics;
4. Reporting; and
5. Review and Verification.
The Ministry of Finance has mandated BNP Paribas, Crédit Agricole CIB, and Société Générale to organize a series of fixed income investor meetings in the United States and Europe commencing on Wednesday February 23rd, 2022 with a focus on its newly established Sustainability-Linked Bond Framework and to prepare for a potential issuance of SLBs in the coming weeks, subject to market conditions.
The Government of Chile intends to issue sustainability-linked bonds, with a coupon rate tied to the achievement of SPTs, which will be measured through two KPIs: (i) Absolute Greenhouse Gas Emissions (MtCO2e), and (ii) Share of Non-Conventional Renewable Energy Generation in the National Electric System.
The Sustainability-Linked Bond Framework is available on the website of the Ministry of Finance of the Republic of Chile, as well as its Second Party Opinion, provided by Sustainalytics. This Framework was made with the valuable support of the Ministry of Environment and the Ministry of Energy.
More information about the Republic of Chile’s SLB Framework is available on the institutional website: