S&P Global Ratings estimates the region's sustainable bond issuance could reach $40 billion – $45 billion

• We expect Latin America's (LatAm's) sustainable bond issuance to represent 4.0%-4.5% of the global total in 2025.
• This projection reflects a decline observed in 2024, mainly due to reduced issuance in Chile, which we expect to continue into 2025.
• COP30 in Brazil and guidelines on Amazon-themed bonds will highlight opportunities in nature financing. However, we expect subdued participation in the green bond market for these instruments due to limited scalability.
• Another area to watch are sustainability-linked bonds and whether the easing of credibility concerns could see issuance rebound in 2025.
• Social financing will remain relevant, given that social and sustainability bonds represent 21% and 47%, respectively, of the region's total issuance, compared with 17% and 18% of global issuances.

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Global Financing Conditions May Provide Headwinds For LatAm Issuers

Entities in many LatAm countries aim to expand their investor base by issuing in dollars and euros:

• Foreign-currency issuances may continue to fluctuate amid substantial geopolitical and monetary policy uncertainty.
• Protectionist measures in the U.S. could raise inflation and limit the ability of LatAm central banks to continue cutting interest rates, worsening financing conditions for issuers in the region.
• On the other hand, the continued decline in interest rates, along with the national economic and sustainability agendas, could be engines for issuance growth in the region.
• Brazil and Mexico will continue to lead local-currency sustainable bonds issuance, given that they represent 80% of such issuances in the region.
• Despite an increasing number of sustainable financing frameworks released by Chilean and Colombian issuers, local-currency issuance is still limited in these countries.

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Sovereigns Will Continue To Lead Sustainable Bond Issuance In The Region

In 2024, the governments of the Dominican Republic and Honduras issued sustainable debt for the first time.

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Sustainable Bond Issuance Fell Despite Strong Conventional Bond Growth

• Sustainable bond issuances still represented more than 20% of the total bond market in 2024.
• Even among the region's largest economies, country-level proportions vary (Mexico 38%; Brazil 18%).

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Issuer Base For Sustainable Bonds In LatAm Has Significant Growth Potential

As of 2020, issuer concentration remains high across most countries in the region.

• While Brazil, Chile, and Mexico are the largest sustainable bond markets in the region, each one displays distinct issuance patterns.
• Brazil has a highly fragmented, yet active, private sector, with only two sovereign issuances to date. Mexico is witnessing increasing demand and supply for private-sector issuances, complemented by regular sovereign issuances across various markets. In contrast, the Chilean market is primarily driven by government activity.
• We believe the transparency and standardization of local taxonomies are key to increasing the number of new sustainable bond issuers in LatAm. We expect taxonomies to improve the appeal of sustainability-labeled issuances to local and international investors.

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Central America And The Caribbean Are Still In The Pioneering Stage

A gradual addition of new countries and sectors since 2020 reflects the region's nascent market.

• In 2024, El Salvador-based Sistema Fedecrédito and the Republic of Honduras placed their first sustainable bond issuances.
• While there is growing interest and potential for green and sustainable financing, the region is in the early phases of establishing frameworks, market guidelines, regulations, and investment opportunities.
• We expect the number of climate resilient deferral clauses (CRDCs) to rise in coming years. These clauses allow eligible sovereign borrowers to defer payments on their debt following natural disasters. We view this as particularly relevant for countries that are highly exposed to extreme climate or environment shocks.

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Sustainable Bond Market: Deep Dive

Brazil

• While other countries in the region decrease interest rates, monetary policy in Brazil is likely to continue moving in the opposite direction from those of other LatAm countries.
• Local market dynamics may be challenging in 2025, given higher interest rate burden for issuers.
• With the upcoming COP30 in Brazil, we expect new financing opportunities and a shift among issuers to align their debt offerings with nature and climate objectives.

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Table 1

Mexico

• Trade negotiations with the U.S. have led to considerable macroeconomic uncertainty in Mexico, which may negatively affect sustainable bond issuance in the short and medium term.
• Sustainable bond issuances maintained a robust pace until the third quarter, totaling $15.1 billion, up from $14.6 billion during the same period in 2023.
• The country's first sustainable asset-based security (ABS; Second Party Opinion: Grupo de Bursatilizacion Conjunta's Sustainable Framework) will provide financing alternatives for small and midsize enterprises through nonbank financial institutions.

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Table 2

Chile

The government's focus on locally issued debt is a shift in the growing trend.

• We believe the Chilean government will gradually decrease the proportion of bonds issued in foreign currencies, aiming to achieve 70% of total issuance in Chilean peso in 2025.
• Labeled bonds account for only 28% of the public debt stock in local currency, contrasting to 75% in foreign currency.
• Despite low overall issuance volume, new participants are entering the market, particularly in the financial, transportation, energy, and forestry sectors.

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Table 3

Colombia

• Fiscal challenges and global uncertainty may present headwinds.
• Climate policies have been established in the country, but the implementation risk remains a key factor influencing new green investments.
• In the past two years, sovereign issuances accounted for most of sustainable issuances, along with several banks and one utility tapping the market.
• Colombian banks have taken the lead in issuing biodiversity bonds.

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Table 4

Nature Financing Emerges In LatAm Sustainable Bond Market

COP30: the nexus between climate and biodiversity:

• COP30 will convene in the Brazilian Amazon in November 2025, casting a spotlight on the importance of biodiversity and nature-related risks and opportunities.
• While sustainable bonds are expanding into emerging markets, not all projects can be funded solely using debt, underscoring the need for innovative financing solutions.
• The agreement reached at COP29 translates into a tripling (in nominal terms) of the previous climate finance goal.

Guidelines on Amazon-themed bonds to facilitate financing:

• The Inter-American Development Bank and the World Bank announced the upcoming launch of the guidelines for Amazonia Bonds.
• The guidelines will outline project selection and evaluation criteria, measures to mitigate environmental and social risks, and indicators to report expected impact.
• Amazonia spans significant portions of Bolivia, Brazil, Colombia, Ecuador, Peru, and Venezuela, as well as the entire land area of Guyana and Suriname

LatAm Plays A Key Role In The Global Blue Bond Market

Blue instruments total less than 1% of the global sustainable financing market, but issuance is set to rise. (Please see Sustainability Insights: Second Party Opinions Show a Rising Tide of Blue Finance, published Oct. 31, 2024.)

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Table 5

Sustainable Bonds Defined

Sustainable bonds fall into two main categories:

Sustainability-linked bonds (SLBs):  Any type of instrument for which the financial or structural characteristics can vary depending on whether the issuer achieves predefined sustainability objectives.

Use-of-proceeds bonds:   Any type of instrument where the net proceeds (or an equivalent amount to the net proceeds) are exclusively used to finance or refinance, in part or in full, new and/or existing eligible green and/or social projects.

The three main subcategories of use of proceeds instruments are:

• Green bonds: Instruments that raise funds for projects with environmental benefits including renewable energy, green buildings, and sustainable agriculture. This includes blue bonds, which are instruments that raise funds to support the sustainable use of maritime resources and promote related sustainable economic activities.​
• Social bonds: Instruments that raise funds for projects that address or mitigate a specific social issue and/or seek to achieve positive social outcomes, such as improving food security and access to education, health care, and financing, especially but not exclusively for target populations.
• Sustainability bonds: Instruments that raise funds for projects with both environmental and social benefits.

Transition bonds can be either sustainability-linked or use-of-proceeds bonds issued specifically to support climate transition goals, geared toward issuers in hard-to-abate sectors. Projects that such bonds support may not always be "green" but still aim at supporting climate transition.

Deborah Siqueira, an S&P rating analyst, contributed to this report.

Related Research

• Sustainable Bond Outlook 2025: Asia-Pacific Issuance Could Hit Record High, Feb. 23, 2025
• Sustainable Bond Outlook 2025: Global Issuance To Reach $1 Trillion, Feb. 26, 2025
• U.S. Municipal Sustainable Bond Outlook 2025: Sustainable Bonds Expected To Trail Conventional Market, Feb. 26, 2025
• Sustainable Bond Outlook 2025: Middle East Issuance To Remain High, March 4, 2025