1. SLB Bond Issuances and Framework

During the last years, the Republic of Chile (“Chile” or “the Republic”) has made significant efforts related to ESG topics, including different sectorial initiatives that finally resulted in the financial integration of these categories in its debt plan. Thus, in 2019 Chile issued its Green Bonds, in 2021 its Social and Sustainable bonds, and its first SLB bond in 2022. Most recently during 2023 Chile added a new gender KPI under its SLB framework.

Using this new Framework, Chile issued its first Sustainability-Linked Bond in the international markets, becoming the first country to issue a bond with these characteristics and reflecting its commitment to sustainability and its status as the leading sovereign in the ESG space.

In June 2023, the Republic of Chile decided to expand its SLB Framework by adding a new KPI related to gender equality. Until the end of 2023, Chile issued six new bonds with the gender KPI, including peso denominated bonds and an inflation-linked bond, supporting ESG practices and benchmarking also in the local market.

1.1 Context

In its initial SLB Framework published in March 2022, Chile established two KPIs with their corresponding Sustainability Performance Targets (SPTs). The KPIs are as follows:

• KPI 1. Greenhouse Gas (GHG) emissions per year, measured in MtCO2eq.
• KPI 2. Non-Conventional Renewable Energy (NCRE) Generation, as the percentage generated in the National Electric System, measured in megawatt hours (MWh).

Later, in June 2023, and considering the relevance of gender equality and social factors for the country, which were also reflected in the previous expansion of its Green Bond Framework to include social projects, a similar approach was followed in the SLB Framework, including an additional KPI. The KPI is as follows:

• KPI 3. Women’s representation on the boards of directors at companies, measured as a percentage.

As established in the Framework:

• Each SLB may have one or more SPT Events, each with an associated event observation date and financial implication; and
• If any KPI has two or more different event observation dates, the financial implications may be cumulative. The amount, timing, and mechanism for payment of the financial implications are set forth in the relevant legal documentation for each specific SLB issuance.

The SPTs included in the SLB Framework were the following, for each KPI:

1.2 Financial and SLB Characteristics

Chile has built a strong history related to SLB issuances. As 2023 year end amounted to a total of US$ 8,031 million of SLB bonds. A summary of the financial characteristics is presented in Table 1.

As mentioned before, in the typical SLB structure, certain financial implications are derived from SPT Events, as defined in the SLB Framework. In particular, SLB bonds include the possibility of increasing the coupon payment in case Chile does not comply with the SPT committed (the step-up). In Table 2 there are key aspects regarding the step-up selected:

1.3 Reporting commitments

In its SLB Framework, Chile committed to “publishing a report (SLB Report) annually, containing a qualitative or quantitative explanation of the main factors behind the evolution of the KPIs, as well as (when available) the progress of the KPIs established in this SLB Framework”. Both step-ups might be triggered on March 7, 2034 associated with the following targets:

By publishing this report, Chile complies with that commitment, disclosing:

• Information regarding KPI 1, in accordance with its current NDC protocol.
• Information regarding KPI 2, informing the participation of NCRE in the total production of the year, in accordance with data from the National Electricity Coordinator, a technical body of public law.
• Information regarding KPI 3, informing the latest available participation of women in board of directors at companies that report to CMF.
• Information on the mitigation policies efforts, as well as actions and policies to comply with the targets.