Green bonds, a ‘magnet’ to attract capital for development

Sustainable finance is a yardstick investors are turning to, and assets in environmental, social and governance (ESG) finance could reach $50 trillion by 2025 globally according to the World Bank.

(Colombia will hold a third auction of green bonds for $500,000 million).

For this reason, the entity issued a document in which it recognizes Colombia for its green bonds. The first auction of these took place in September 2021, for $1.49 billion. In October of last year it made the second, for $650,000 million, and in June of this year the third, for $500,000 million.. In total, the country has issued green bonds for $2.1 trillion.

“Green bonds issued by the government could attract much-needed capital for economic development, aligned with the government’s national and international commitments, focused on achieving an environmentally sound and low-CO2 future”warns the World Bank.

The entity states that “any such transaction must be managed in the context of fiscal responsibility”, and gives an example that in Colombia, sovereign green bonds were included in the 2021 financing plan, within the fiscal parameters and also the budget.

(Colombia won the award for the Green Bond of the year 2022).

Second, that it is essential to adhere to a solid public debt management strategy, and thus, that responsible entities consider both the advantages and disadvantages of issue said bonds, establish objectives and implement the strategy in line with the medium-term debt management plan, as the country has done.

Another message is that investment priorities must be aligned with the country’s development objectives, and also that investors expect the highest levels of responsibility and transparency in companies labeled green.

The fifth point is related to the green taxonomy launched by the Colombian government in April of this year, as a guide that makes it possible to more clearly identify investments of this type, and the adaptation of a green finance taxonomy is another of the teachings of the process.

“Classifying projects into categories or thresholds designed for countries with different geographic, macroeconomic, and social characteristics would substantially limit the portfolio and variety of projects, although there is a risk of selecting projects that do not adhere to generally accepted standards,” recognized by the World Bank.

A COLOMBIAN STYLE ISSUE

The World Bank noted that “Colombia became the first Latin American country to issue a sovereign green bond in local currency”, and classifies it as a success story. As of March this year, there were 27 countries in the world that had issued bonds of this type.

Among the relevant points of these bonds is that they are in line with the national policy regarding the commitments, policies and strategies for environmentally sound and low-carbon economic development. And it also corresponds with the debt management strategy.

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