SAO PAULO, Dec 4 (Reuters) - Santander Brasil, a unit of Spanish bank Santander, is talking to large Brazilian companies about prospects for an inaugural green bond offering in Latin America’s largest economy, where several infrastructure projects have the green credentials required for that type of deal.
The market labels bonds green when proceeds are earmarked to projects that are beneficial to the environment. Capital use is usually verified by an independent third party.
“We have negotiations going on, but there is nothing certain yet,” said Cristina Schulman, head of Debt Capital Markets at Santander Brasil, after taking part in a roundtable about green bonds on Thursday.
“There is a lot of potential for this type of bond in Brazil, due to the number of infrastructure projects under way,” she said.
Green bonds were first launched by multilateral banks several years ago, but in the last two years they have made inroads at commercial bank operations.
Green bonds issued in 2014, mostly in Europe and the United States, are likely to total $40 billion, according to the Climate Bonds Initiative, a not-for-profit organization that mobilizes debt capital markets for environmental solutions.
Schulman cited clear demand for such offerings from funds built exclusively to invest in environmentally friendly programs. She also said some large investors have set aside part of their allocations for this type of investment.
Obvious projects in Brazil that could be funded by green bonds include renewable energy sources, such as wind and solar farms. Other viable initiatives could be focused on energy efficiency, waste management and forest restoration.
Matheus Cavallari, assistant secretary for microeconomic policy at Brazil’s finance ministry, said such a class of bond could be included in a program the Brazilian government has for infrastructure notes that are tax free for investors.
“It seems possible to fit the green bonds in this class of notes that enjoy fiscal benefits,” he said.
Mining company Vale and gas utility Comgas are among companies in Brazil which have already issued the infrastructure notes.
In Europe, Santander advised Spanish company Iberdrola in a 750 million euros green bond issuance this year linked to renewable energy projects and also helped structure a Unilever offering whose proceeds will be used on energy efficiency and waste treatment programs. (Reporting by Marcelo Teixeira; Editing by Richard Chang)