Mario Marcel Cullell | Minister of Finance
Over the years, Chile has strengthened its commitment to climate change mitigation and environmental protection through both national and international initiatives. Heeding the imminent need to transition toward a net zero-carbon economy by 2050, various ministries, including the Ministry of Finance (MoF), have created specialized areas to address climate change and promote public-private cooperation.
Various Ministries, including the Ministry of Finance (MoF), have taken on a key role in supporting this national development strategy through the consideration of all three of these components as part of the general ministerial mandate. The MoF, responsible for the country’s fiscal policy, has assumed a pivotal role in steering public and private capital flows to support and uphold environmental commitments, as demonstrated by a diverse set of initiatives, including being responsible for the Country´s Climate Change Financial Strategy.
Chile’s Green, Social, Sustainability and Sustainability-Linked Bond issuances, structured and executed by the Public Debt Office of the MoF, have been the cornerstone of this strategy. In May 2019, Chile published a Green Bond Framework to support the nation’s inaugural Green Bond issuance and drive investment into climate focused projects. In November 2020, given the importance of social investments for the nation’s sustainable development agenda, Chile updated its Framework to incorporate social categories, expanding the nation’s toolkit to include Social and Sustainability Bonds, which were first issued in January 2021.
In February 2022, Chile becomes the world’s first country to use sovereign debt to fund its long-term climate initiatives and accelerate its energy transition, with a landmark transaction that aligned economic incentives with the achievement of ambitious sustainability targets. The original SLB Framework focused on the first pillar: environmental sustainability. Specifically, the KPIs encouraged the implementation of necessary actions to fulfill the greenhouse gas (GHG) reduction commitments agreed in Chile’s updated Nationally Determined Contribution (NDC) and implement an ambitious national clean energy agenda.
In fact, Chile reaffirms its commitment to the development of the green and sustainable financing throw ESG Bonds, becoming one of the major issuers in the world with one of the largest stock of its debt in labelled instruments.
Recently, the Ministry of Finance presents is updated SLB Framework to account for the third and very important pillar for accomplishing the nation’s inclusive and sustainable development strategy: social sustainability. The new social KPI focuses specifically on increasing the percentage of Women Board Members. Through the issuance of Sustainability-Linked Bonds tied to achieving this Gender Equality KPI, Chile will reinforce the importance of gender diversity in the highest levels of management, both in the public and private sector, while formally committing to a goal that has a relevant impact for the labor force and governance structures of the Chilean companies that will have impacts towards an inclusive and sustainable development of the country. Achieving this target requires material efforts by both the private and public sector. We hope these efforts encourage other sovereign and private issuers to incorporate social KPIs in other SLB transactions brought to the market.