Engaging on Uruguay’s First Sustainability-Linked Bond Issuance

May 2023 – 2 min read

In November 2022, the Emerging Markets Sovereign team advised officials in Uruguay on timing and communication around their new sustainability-linked bond issuance. 

Why we engaged: During a roadshow with Uruguay advisors in November 2022, the Emerging Markets Sovereign team advised officials on proper timing and communication around their new sustainability-linked bond (SLB) issuance. Building on the team’s analysis of Uruguay as a leader in ESG performance, and using the team’s proprietary ESG Bond Scorecard, the Barings portfolio manager encouraged officials to think strategically about how the bond would be priced considering its step-down, step-up model that supports forest protection. The scorecard considers such factors as adherence to Nationally Determined Contributions, target motivations, transparency and evaluation, and track record.

How we engaged: The Barings team advised that the KPIs and their perimeters would likely be achieved by the government, thus benefiting the Uruguay issuers in eventual achievement of the step-down and thus making their cost of debt lower. The team further advised on proper market pricing premium, and underlined that Uruguay wants to be a market leader in sovereign ESG products even if they are willing to pay a premium on this.

Outcome: The Emerging Markets Sovereign team then became anchor investors owning a significant portion of the initial issuance and will continue to engage with Uruguay on their achievement of their environmental protection targets. As SLB issuances increase in the sovereign space, the team continues to watch them closely and contribute to these positive developments in the ESG-related issuance space.

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