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Dominican Republic Makes Green Bond Debut
By Guzmán Ariza, Attorneys at Law
The Government of the Dominican Republic, through the Ministry of Finance, successfully issued its first sovereign green bond to fund sustainable projects in clean energy, transportation and waste management, among others. The issuance, amounting to USD 750 million, marks the first sovereign thematic bond from the Caribbean and Central America region.
A green bond is a fixed income debt instrument in which an issuer (typically a corporation, government, or financial institution) borrows a large sum of money from investors for use in sustainability-focused projects. Green bonds work similarly to a traditional bond issuance, except the funds are slated for use in energy efficiency, renewable energy, or other projects that meet certain sustainability requirements, often formalized in a green bond “framework” developed by the issuer. Green bonds typically involve one or more third-party firms to underwrite, certify, and monitor the bond issuance.
The Dominican program will enable investors to back public projects that drive the country's environmental objectives. The government expects that sovereign green bonds will boost the scale and credibility of the Dominican Republic's green finance market and attract more green capital to the country by increasing transparency around climate outcomes and the volume of green investments available.
According to the Ministry of Finance, the country's first green bond issue received demand in global capital markets from foreign investors, six times higher than the amount requested. "This milestone demonstrates the confidence in the country's commitment to environmental protection, social needs and sustainable development, as well as the solid performance of the Dominican economy", the Ministry of Finance stated in a press release.
The World Bank, which supported the government on the issuance, also highligthed the success of the program. "In a context of budget constraints, mobilizing private and foreign financing is crucial to meet commitments and goals in sustainable development and climate change. The framework offers high standards of transparency, solid governance foundations, and clear eligibility and expenditure reporting criterio", a World Bank report says.
Guzmán Ariza, Attorneys at Law
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