(Adds definition of green bonds, use of proceeds)
By Marcelo Teixeira
SAO PAULO, Dec 4 (Reuters) - Banco Santander Brasil SA , a unit of Spain’s Banco Santander SA, is in talks with large Brazilian companies for the first green bond offering in Latin America’s largest economy, where several infrastructure projects qualify as such issues.
Bonds are considered green when proceeds are earmarked for projects that are beneficial to the environment, and 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 participating 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.”
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 bond offerings this year, mostly in Europe and the United States, could 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 environment-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 SA and gas utility Comgas SA are among companies in Brazil which have already issued infrastructure notes.
In Europe, Santander advised Spanish company Iberdrola in a 750 million euro green bond sale this year linked to renewable energy projects. It also helped structure a Unilever BV deal whose proceeds will be used for energy efficiency and waste treatment programs. (Reporting by Marcelo Teixeira; Editing by Richard Chang)