Sustainable bonds

Regulation & Policy    Jun 29, 2021 2:47 PM

Environmental, social and corporate governance sustainability are generating a wave of investment innovations such as sustainable performance bonds.

The International Capital Market Association said that the financial and structural characteristics of these bonds may vary depending on whether the issuer achieves predetermined sustainability targets, Portafolio reported.

The Superintendencia Financiera is working on a draft to establish minimum reporting requirements for these investments.

Clemente del Valle, Director of the Regional Center for Sustainable Finance, said that this type of financial innovation has already been implemented in developed countries.

He explained that the bond is linked to the fulfillment of an environmental or social goal.

The Superfinanciera has held several meetings with international specialists on the subject to adopt “good practices that can and will allow this development in Colombia.”

Del Valle said that the scope for these new investments is wide, as companies can set goals such as greenhouse gas emissions, water consumption, energy efficiency and reforestation, among others.

“The investor says that if the firm achieves the goals, he will charge a low rate and if not, he will punish the company by charging a higher one,” Del Vale said.

Del Valle concluded by saying that financial entities are interested in these investment mechanisms in Colombia.

Bottom-Line: The government should announce the regulation and requirements for these bonds, as they generate great attraction among investors.

In addition, these mechanisms will be fundamental to finance the energy transition, accelerating the development of new projects.

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