In November 2023, the Federative Republic of Brazil priced a $2 billion inaugural sustainable bond.

Proceeds will be allocated to finance and/or refinance eligible green and/or social projects under Brazil's Sovereign Sustainable Bond Framework.

Among the initiatives labelled as green in the framework are the preservation of native biomes, including deforestation control in the Amazon and Cerrado regions, support for Fundo Clima – a sovereign climate change fund, renewable energy production, energy efficiency, and sustainable natural resource management.

However, Brazil is expected to allocate most of the proceeds from this first issuance to social projects. This is reflective of the fact that the country's budget is structured in a way that most green projects (energy, transportation, etc.) are funded by the local governments and most social projects (cash transfers, affordable housing, etc.) are funded by the federal government.

Brazil's Sovereign Sustainable Finance Committee (CFSS) will be responsible for consolidating and publishing the annual allocation and impact reports for sustainable bond issuances by the National Treasury. Moreover, the CFSS has committed to publish a pre-allocation report for every issuance under the framework.

One Sustainable Debt Awards judge praised this element saying, "pre-allocation reports are one of our biggest asks to issuers".

Brazil announced its framework in September 2023, followed by a series of investor meetings in London, Boston and New York. The sovereign has communicated to investors the intention to increase the focus on green over time.

Upon issuance, the order book quickly peaked at 2.9 time over subscription, with more than 240 orders from investors. As a result, Brazil upsized the transaction to $2 billion, from $1.5 billion.

Aneliza Crnugelj, head of debt advisory & ESG Solutions at Santander Brazil, commented: "By issuing this type of bond, the country aims to promote the transition to a greener, more inclusive, and equitable economy. The launch of the framework represents a major step in creating a reference in the foreign market for the Brazilian private sector, stimulating new issuances in the corporate sector with effects on the entire sustainability agenda in Brazil and worldwide.

"This milestone transaction demonstrates ESG-labelled bonds are now part of Brazil's financing strategy reinforcing the country´s commitment to the environmental, social and governance agenda, as well as its sustainable finance agenda for the future," she added.