Green Bonds: A viable path to sustainability

By: María Alejandra Tulipano, Gustavo Vega y Raúl García

Twelve years after the World Bank issued the world’s first Green Bond, thereby creating a new way to connect investor financing with climate projects, Green Bonds have become a viable model for promoting sustainability in the capital markets.

We understand by Green Bonds an agreement in which issuers borrow funds from investors and must repay these funds at an agreed rate after a specified term, provided that these funds are used in the implementation of green or sustainable projects, aligned to 4 basic principles: use of proceeds; evaluation process project selection; management of proceeds; and reporting (WSBI,2018). Governments, companies and other entities all issue bonds to obtain financing for projects.

Green bonds are generally used to finance operations or assets linked to: renewable energy, energy efficiency, sustainable waste management, terrestrial and aquatic biodiversity conservation, sustainable water and wastewater management, products adapted to the green and/or circular economy, production technologies and processes; and climate change adaptation.

In the last 5 years, the issuance of Green Bonds has grown significantly, thanks to the greater degree of awareness and confession that has been generated among countries, regarding the multiple problems caused by climate change and the financial repercussions linked to it.

Most used types of Green Bonds

  • General Obligation Bond (Go Bonds)
  • Corporate Bond
  • Project Bond
  • Covered Bond (Covered Bond)
  • Sukuk or Islamic Bond
  • Supranational, Sub-Sovereign and Agency Bond (SSA)
  • Municipal Bond
  • Sovereign Bond

Verification of Green Bond Status: External Assessors

International standards applied to be considered a green bond:

  • Use of funds
  • Project evaluation and selection process
  • Management of funds
  • Report
  • Climate Bond Standards
  • Pre-issuance requirements
  • Post-issuance requirements
  • Verification and Impact Reporting

With the objective of guaranteeing the correct use of resources in a green issue, it is common to request the participation of third parties, who verify the prospectus of an issue and decree whether it contains the necessary elements to consider the issue as green.


  • Credit rating agencies
  • Accounting Firms
  • Environmental Consultancies
  • Research Institutes
  • Important facts

Even with the strong growth of green bonds, the liquidity of this market is a problem, especially in emerging markets.

The development of the green bond market has been encouraged since its inception by multilateral development banks such as the World Bank, the European Investment Bank and the International Finance Corporation.

If you are interested in further information on how Green Bonds work in the region, and how they can be linked to your company, please do not hesitate to contact María Alejandra Tulipano.

Source: Latin American Association of Financial Institutions for Development.