Fynsa
Green bonds have established themselves as a key trend in the financial world, combining environmental sustainability with attractive returns. According to the World Bank, they are debt instruments whose funds are earmarked exclusively for projects with a positive environmental impact, such as renewable energies, clean transportation or energy efficiency. Thus, issuers have access to long-term financing and investors channel resources towards green initiatives without sacrificing profitability.
Globally, bond issuance with ESG criteria has grown exponentially. In 2024, sustainable debt issuance (green, social, sustainable and sustainability-linked bonds) exceeded USD 1.05 trillion, with green bonds accounting for about two-thirds of that total, according to the Climate Bonds Initiative. Latin America still accounts for a smaller share (around 3% of the total), led by Brazil, Mexico and Chile. In this context, Peru has been an emerging player, accounting for about 3.3% of cumulative green emissions in the region, but with clear signs of growing dynamism.
Sustainable finance has gained momentum in Peru in just a few years. Up to 2021, local issuers placed close to USD 4.8 billion in thematic bonds, of which USD 1.1 billion were green bonds (18% of the total) issued up to April 2022. Although the country started later than others, its market has taken off quickly.
The Peruvian green bond market took its first steps in 2014 with the issuance of USD 204 million by Energía Eólica S.A., earmarked for wind farms in the north of the country. In 2018, Protisa Peru placed USD 30 million for energy efficiency and water sustainability. Starting in 2019, issuances accelerated with placements such as the first green bond of Banco de Desarrollo del Perú (COFIDE) and, in 2022, the entry of the banking sector with Credicorp's financial green bond (USD 30 million). COFIDE has been a key player in this market, with six thematic bonds for more than USD 180 million, which represents about half of the sustainable issues.
The public sector has also entered the market. Since 2021, the Government issued four sustainable sovereign bonds, including one in 2023 for S/ 16,358 million (USD 4,400 million), awarded for its inclusive approach. The market also innovates. COFIDE announced the first blue bond (USD 28 million for water and sanitation) and BanBif placed the first subordinated green bond (USD 20 million) backed by LAGreen. These cases reflect greater market sophistication.
The green bond boom in Peru responds to two forces: profitability and climate impact. The country is highly vulnerable to climate change and could lose up to 6% of GDP by 2030 without action. Green bonds are therefore a key tool for financing clean energy, resilient infrastructure and water management.
Financially, green bonds have proven to be an attractive option in addition to their environmental contribution. They are often in high demand in international markets, allowing issuers to access competitive rates through the so-called "greenium". In the first half of 2023, the average demand for green bonds in dollars was 5.4 times higher than the amount offered, facilitating cheaper financing for sustainable projects and rewarding issuers committed to the environment.
In Peru, global interest in green bonds represents a great opportunity. The Central Reserve Bank of Peru (BCRP) highlights its potential to attract foreign capital and boost the local market. Peruvian institutional investors, such as AFPs and insurance companies, already apply ESG criteria, driving local demand.
Investing with a sustainable approach does not imply sacrificing profitability. Today, more investors evaluate their decisions by considering financial return and ESG return. If a green bond offers similar flows and risk to a conventional bond, its positive impact can make it more attractive. This pairing is driving the market boom.
The growing interest of global investors and local funds with ESG mandates could generate a virtuous circle: more issuance generates greater diversity and liquidity. In addition, compliance with international standards such as the Green Bond Principles and the participation of external verifiers reinforce transparency, credibility and trust in these issues. Continuing to strengthen the traceability of the use of funds and impact reporting will be key to attracting more players to the ecosystem.
Looking ahead, the outlook is encouraging. New instruments such as sustainability-linked bonds (SLBs), which reward issuers that meet ESG targets with lower rates, or transition bonds for industries seeking to decarbonize, are expected to enter the market. These innovations will allow more companies to participate in sustainable finance, aligning their economic objectives with the fulfillment of environmental or social goals. Thus, the Peruvian market could consolidate itself as a regional benchmark in thematic bonds during the new financial cycle.
Armando Herrera
General Manager Fynsa Peru
