JAMAICA is planning to offer green bonds for the first time in 2023, with reports coming out of the November COP27 conference in Egypt that officials from the island’s Ministry of Industry, Investment and Commerce have proposed an 18-month timeline for the offer.

COP27 brought together the parties to the UN Framework Convention on Climate Change (UNFCCC).

The Government of Jamaica is considering issuance of both green bonds and blue bonds, Matthew Samuda, Jamaica’s minister without portfolio in the Ministry of Economic Growth, said in a Bloomberg interview at the COP27 climate summit in Egypt in November.

Green bonds are typically used to fund projects which aim to benefit the climate or the environment. Comparatively, blue bonds are intended to benefit marine ecosystems.

“It is something we are considering,” Samuda was quoted as saying, adding that the size of a potential green bond is still to be determined. As part of its overall drive to protect its environmental resources, Jamaica will also announce new protected areas over the next year, Samuda was reported to have said according to Bloomberg writer Neil Chatterjee.

The United Nations Economic Commission for Latin America and the Caribbean, known as ECLAC or CEPAL, indicates that the bond market deal flow for the region slowed in 2022 due to tightening financial global conditions. However, the proportion of green bonds has risen in the region.

Green bonds usually carry the same credit rating as their issuers’ other debt obligations.

Contrary

The regional increase in green bond offers is contrary to global patterns. Bloomberg reported in November that overall, green bond sales by governments have slowed in 2022 after exponential growth in recent years, as the need for borrowing cooled from the spike seen during the COVID-19 pandemic.

Globally, ethical bonds underperformed conventional debt in a broad market sell-off.

Jamaica, if it delivers, will follow in the footsteps of Barbados which has been the most innovative in the market segment in 2022.

In September 2022 Barbados concluded a US$150-million blue bond sale to fund marine protection under a debt arrangement with The Nature Conservancy (TNC), a US non-profit.

The previous year a similar arrangement worth US$364 million was concluded between TNC and Belize.

Barbados issued the world’s first government bond with a clause allowing payments to be suspended in the event of another pandemic. Finalised in a deal with bankers on Wednesday, September 21 the bond, to be repaid over the 15 years, will be the first to allow a government to suspend its payments if another outbreak similar to COVID-19 occurs. Payments can be suspended for up to two years at a time, and twice if necessary, but cannot be cancelled altogether.

Under the deal, Bloomberg outlined how Barbados spun US$150 million of its sovereign bonds into cheaper debt, striking a deal to buy back a portion of its US$531-million bond due in 2029, replacing it with lower-cost debt that comes with repayment guarantees from The Nature Conservancy and the Inter-American Development Bank.

As part of the deal the nation is also buying back a portion of its 8 per cent local currency notes due 2043.

Increase regionally

ECLAC says that, bottom line, LAC issuance of green, social, sustainability and sustainability-linked bonds slowed down in the first eight months of 2022, but still amounted to less than total overall bond issuance. Green bonds’ share in the region’s total overall issuance increased to 34 per cent from 31 per cent in 2021.

Overall, borrowing costs for LAC issuers increased by 100 basis points in the first eight months of 2022, amid rising financing costs and weaker risk sentiment, and reached a peak in June 2022. At 499 basis points at the end of August, LAC bond spreads were 127 basis points higher than pre-pandemic levels.

The Jamaica Observer reached out to the Ministry of Finance and the Public Service and the Ministry of Industry, Investment and Commerce for further details on the planned bonds after COP27 , but no responses were garnered.

The island’s last US-dollar-denominated debt issue was completed in 2014, coordinated by Citi and joint bookrunner BNP Paribas raising US$800 million, a ten-year soft bullet bond.

The issue was described as Jamaica’s largest transaction ever and the country’s lowest coupon in the international market. The yield came below initial price projections of 8 per cent.

International investors, mainly from the US and Europe, dominated the book, with small allocations to LatAm accounts. In September 2019 the GOJ reopened the 7.875 global bond for 26 years with a new maturity date of July 2045.