Paraguay first to adopt SDG bonds in its national regulation

Posted On April 15, 2021

Illustration: UNDP Paraguay

 

Paraguay is the first country in Latin America to typify and incorporate guidelines for the emission of Sustainable Development Goals (SDG) bonds in its national regulation. The national securities regulatory body  – Comisión Nacional de Valores (CNV) – issued Resolution No. 9/20 on March 5th, which modifies legislation seeking to “endow the stock market with new financial instruments that promote social and environmental objectives” aligned with the 2030 Agenda and the SDGs.

This resolution categorizes SDG bonds as those debt instruments that finance projects with green, social or sustainable goals or measurable impacts; the latter contributing to both environmental and sustainable impact. These type of bonds are not exempt from the general regulations and conditions that apply by law, including in terms of risk qualification, but must be certified by an independent third party, guarantee the use of financing for the specific projects proposed and are subject to periodic public reporting on their impact. If the bond emitter fails to meet these additional requirements, it will lose its SDG bond certification as a way to deter green- or social-washing; all SDG bonds must be verified by an independent verifying third party accredited by the Climate Bonds Initiative.

The resolution states that in terms of the governance, management, transparency, impact assessment and accountability of the SDG bond market in the country, these will be guided by international standards and guidelines, including those of the Green, Social and Sustainable Bond Principles (GBP), International Capital Market Association (ICMA), Climate Bonds Initiative (CBI), International Climate Bonds Standards and UNDP´s Impact Management Standards.

The Word Wildlife Fund (WWF), UNEP Finance Initiative and UNDP Paraguay have assisted the CNV in drafting this SDG bond regulation. UNDP will continue to support the CNV in building the national ecosystem for the domestic SDG bond market, including by promoting UNDP´s global SDG Impact standards.

The SDG bonds will help Paraguay´s COVID response in the recovery phase by promoting and facilitating the financing of projects that will not only stimulate the economy, but also contribute social and environmental benefits to “build back better.” Considering that the most vulnerable groups will be hardest hit by the economic slowdown, it is crucial that expansionary economic policies to address the forecasted recession aim to generate employment for these vulnerable groups. Likewise, investment in environmentally-friendly projects could contribute to improving public health (e.g. air quality). In this regard, SDG Bonds could leverage investment that will translate into measurable social and environmental benefits in the country´s COVID recovery.

"We must make the transition towards sustainable development for the prosperity and well-being of all. And sustainable finance plays an important role in guiding our economy towards the good use of our resources. That is why this first step that Paraguay takes to typify and regulate the SDG Bond's market is crucial, " says Joshua Abreu, president of the National Securities Commission.

Resolution No. 9/20:  http://www.cnv.gov.py/normativas/resoluciones/res_cnv-09-CG-20.pdf