More Latin American countries are making inroads into green bonds
The current crisis is creating a lot of uncertainty that could affect the green bond market and the situation is being closely monitored. However, the outlook for the region remains positive as we see growing interest from both investors and issuers, both sovereign and corporate, in green and sustainable debt instruments.
There is a lot of room for growth in Latin America. I would probably say that all the major countries in the region have issued or developed initiatives around sustainable finance and even with a highlight for Central America and the Caribbean, with smaller countries, which could be a challenge to access international capital markets.
It is all very new and the region is just beginning to tap the potential. More countries are joining. So far, 11 countries have entered the market and there are still two countries to enter.
Going forward, there is diversification in both issuers and asset classes. There is also a lot of potential in the land-use space. It is natural that energy will continue to grow because renewable energy is very large in the region and will continue to grow. The market is very concentrated in Latin America. In Mexico, Brazil, Colombia, Chile, Guatemala. The concentration would start to dissolve in the next few years as the market moves towards other types of players.
More Latin American countries are expected to be added to the mix in the coming years. When it comes to the development of green finance, the same trends apply but to different degrees. It is often the case that when one country starts to do things differently, the rest follow the trend creating competitive pressures that, together in the specific region, will allow the market to develop in many ways.
Many countries issue green bond guidelines and broader sustainability bond guidelines to develop the market in their respective countries. For example, CMI Energia, which is part of the Bosch Gutierrez family legacy, recently placed a good amount of bonds in Guatemala.
The ecosystem infrastructure for more issuers to come in is also important. There are some organizations that are working, also the stock exchanges, for example, CFE in Mexico or the green finance council in Brazil allow more issuers to enter the market where there is more information available and support as the issuance of green bonds has different requirements.
We expect to see infrastructure growth in terms of transportation and agriculture. There is also potential for blue economy projects. These are related to the sustainable use of ocean resources such as fisheries, marine renewable energies such as offshore wind energy and tsunami energy.
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