The Role of Green Bonds in Climate Financing in Brazil
By Lucas Ribeiro Cunha (CFC-GS/UFPA) Green bonds are debt instruments whose proceeds must be used to finance projects with positive environmental benefits, such as renewable energy, energy efficiency, clean transportation, sustainable management of natural resources, and pollution control. The mechanism functions like a conventional bond, such that an investor purchases the bond and receives a return, but with the distinction that the issuer commits to allocating the proceeds exclusively to “green” projects, as explicitly stated in the offering documents—the so-called “use of proceeds” (Oliari, 2025). The relevance of green bonds stems from the fact that the climate transition requires significant amounts of capital, and the public budget alone is insufficient to finance all mitigation and adaptation needs. In view of this, such a mechanism enables the raising of funds for environmental purposes. The Green Bond Principles of the International Capital Market Association (ICMA) specifically reinforce this aspect of integrity: the issuance must clearly outline the use of proceeds, project selection criteria, management of the raised funds, and subsequent reporting of environmental impacts (ICMA, 2025). In Brazil, this instrument takes on particular importance, given that the country possesses significant comparative advantages for a low-carbon economy, such as a relatively clean electricity grid, great potential for renewable energy, forest resources, biodiversity, and opportunities for sustainable agriculture. However, at the same time, it faces structural challenges, such as deforestation, climate vulnerability, regional inequality, infrastructure deficits, and the need for financing for adaptation, which is why green bonds can help direct capital toward strategic sectors of Brazil’s climate agenda, linking environmental protection to long-term investment logic. Thus, Pantoja (2022) identified, as a starting point for the domestic market, the abundance of eligible assets, especially in the renewable energy sector, combined with the BNDES’s pioneering experience as a benchmark issuer. On May 9, 2017, the aforementioned institution became the first Brazilian bank to issue green bonds in the international market, notably a USD 1 billion bond with a seven-year maturity, listed on the Luxembourg Green Bond Market and intended to finance investments in wind and solar energy (BNDES, 2017). At the national level, as noted in FEBRABAN’s Guide to Sustainable Debt in Brazil (2023), the sectors with the most labeled transactions were energy, finance, bioenergy, pulp and paper, and agriculture, with the pulp and paper sector leading in terms of financial volume (24% of transactions). In addition, Brazil ranked first in the region for corporate green bonds, raising USD 7.2 billion in sustainable debt that year for climate and biodiversity projects (World Bank, 2024). Thus, the Brazilian sustainable debt market is already showing significant growth. According to the Climate Bonds Initiative, by the end of the first half of 2025, the cumulative debt labeled VSS+—green, social, sustainability, and sustainability-linked bonds—issued in Brazil reached US$67.8 billion. Of this total, US$49.3 billion was aligned with the organization’s methodology, and Brazil ranked as the region’s largest issuer of green bonds, with US$30 billion (Climate Bonds Initiative, 2025). These figures indicate that the country no longer occupies a marginal position in the sustainable finance market; on the contrary, it has become one of the leading Latin American hubs for the issuance of financial instruments with environmental purposes. In 2023, Brazil conducted its first sustainable sovereign bond issuance, worth US$2 billion, an operation aimed at broadening the investor base and setting a benchmark for the private sector (World Bank, 2024). Although Brazilian sovereign bonds are classified as sustainable rather than exclusively green, they play a significant role in climate finance, as they can allocate a portion of the proceeds to environmental, mitigation, and adaptation programs. However, the growth of this market also poses risks, particularly greenwashing—that is, the environmental labeling of transactions that do not generate real, measurable, or additional climate benefits. For this reason, green bonds must meet technical eligibility criteria, ensure transparency regarding the allocation of funds, undergo external verification, and be subject to impact monitoring. Thus, green bonds occupy a distinct and complementary space in the climate finance ecosystem, as they mobilize private capital directly in debt markets. Costa (2023) emphasizes that the mechanism has dual relevance in the context of climate finance: on the one hand, it creates market incentives for private issuers to internalize environmental objectives into their fundraising strategies; on the other, by signaling credibility and transparency to international investors, it helps reduce the cost of capital allocated to the ecological transition. Despite significant growth, the Brazilian market still has weaknesses, including the absence of a binding national green taxonomy, information asymmetry between issuers and investors, and high transaction costs, especially for small and medium-sized issuers (Pantoja, 2022). Thus, the challenge for Brazil is not merely to issue more green bonds, but to ensure that they finance activities that are environmentally sound, socially responsible, and aligned with the country’s climate commitments, given that green bonds can be decisive instruments for transforming Brazil’s environmental advantages into concrete investments, provided they are accompanied by strong governance, credibility, and effective measurement of results. You can read more articles about climate finance on our blog and access financing data on our tracker. Check it out! REFERENCES BANCO MUNDIAL. Título Soberano Sustentável do Brasil: financiamento para uma economia mais verde, inclusiva e equitativa. Washington, D.C.: Banco Mundial, 26 fev. 2024. Disponível em: https://www.worldbank.org/pt/news/feature/2024/02/08/brazil-sovereign-sustainable-bond-financing-a-greener-more-inclusive-and-equitable-economy. Acesso em: 29 abr. 2026. BNDES — BANCO NACIONAL DE DESENVOLVIMENTO ECONÔMICO E SOCIAL. Relatório Green Bonds. Rio de Janeiro: BNDES, 2017. Disponível em: https://www.bndes.gov.br/wps/portal/site/home/conhecimento/publicacoes/relatorios/relatorio-green-bonds. Acesso em: 29 abr. 2026. CLIMATE BONDS INITIATIVE. Mercado de dívida sustentável do Brasil mantém forte crescimento e ganha impulso rumo à COP30. Londres: Climate Bonds Initiative, 7 nov. 2025. Disponível em: https://www.climatebonds.net/news-events/press-room/press-releases/mercado-de-d%C3%ADvida-sustent%C3%A1vel-brasil-mant%C3%A9m-forte-crescimento-e-ganha-impulso-rumo-%C3%A0-cop30. Acesso em: 01 mai. 2026. COSTA, Carlos Eduardo Lampert. O financiamento do desenvolvimento sustentável: os títulos verdes (green bonds) como mecanismo de financiamento a projetos com impactos ambientais. Radar, n. 74, p. 7-13, dez. 2023. Disponível em: https://repositorio.ipea.gov.br/server/api/core/bitstreams/88ab93d0-1cf2-4f92-abc2-b4c4c1a4bfa9/content. Acesso em: 4 maio 2026. FEBRABAN — FEDERAÇÃO BRASILEIRA DE BANCOS. Guia de Dívida Sustentável no Brasil 2023. São Paulo: FEBRABAN, abr. 2023. Disponível em: https://cmsarquivos.febraban.org.br/Arquivos/documentos/PDF/GuiaDividaSust_Abr23_02.pdf. Acesso em: 30 abr. 2026. ICMA. Green Bond Principles (GBP). Paris: International Capital Market Association, 2025. Disponível em: https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-principles-gbp/. Acesso em: 02 maio 2026. OLIARI, Reinaldo. Green bonds e o contexto brasileiro. Deloitte Brasil, São Paulo, 2025. Disponível em: https://www.deloitte.com/br/pt/services/audit-assurance/perspectives/green-bonds.html. Acesso em:
