The fundamental pillar of Sustainable Bonds is the commitment to allocate resources to eligible environmental and social projects, whose impacts should be assessed and quantified. In this context, the framework is the document that establishes the obligations that Brazil must fulfill as the issuer of sustainable sovereign bonds. Thus, the Federal Government commits to transparently and responsibly allocate the equivalent amount of net issuance proceeds to eligible expenditure categories that promote sustainability and contribute to mitigating climate change, conserving natural resources, and fostering social development.

The Brazil's framework document is available here.

The Brazil’s Sovereign Sustainable Bond Framework encompasses the following expenditure categories:

Environmental Benefits

1. Pollution prevention and control
   • Greenhouse gas emissions control
   • Solid waste management
2. Renewable energy
3. Energy efficiency
4. Clean transportation
5. Sustainable management of living and natural resources and land use
6. Terrestrial and aquatic biodiversity
7. Sustainable water and effluent management
8. Adaptation to climate change
9. Products, production technologies, and processes adapted to the circular economy

Social Benefits

1. Socioeconomic development and empowerment
   • Poverty reduction
   • Discrimination reduction
2. Food security and sustainable food systems
3. Job creation
4. Access to affordable housing
5. Access to basic infrastructure
   • Urban development and mobility
   • Universalization of basic sanitation

The framework was developed in line with the guidelines of the International Capital Market Association (ICMA): Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines. These principles describe best practices for issuing debt securities that serve social and environmental purposes through global guidelines and recommendations that promote transparency and disclosure, reinforcing the integrity of the capital markets.

The framework also includes a list of activities that cannot be considered eligible for the allocation of net proceeds from sustainable issuances, in light of the above-mentioned guidelines and principles.

Exclusion Criteria

Expenses that relate to the following activities, before or during the allocation of net proceeds, will not be eligible for net proceeds from the issuance of sustainable government bonds:

• Government assistance and subsidies given to civil and military servants (housing assistance, pensions, retirement, medical and health plans, indemnity benefits);
• Public utility advertising;
• Indemnities or penalties linked to compliance with court decisions;
• Alcohol for consumption, Arms, tobacco or gambling industry
• Weapons industry;
• Planning or construction of airport infrastructure;
• Planning or construction of maritime port infrastructure and maritime transport;
• Highway planning or construction;
• Mining;
• Inorganic or synthetic fertilizers, pesticides, or herbicides;
• Extraction, transport, trade or generation of energy from mineral coal;
• Extraction, transport, trade, generation of energy or production of fuels from oil, natural gas and derivatives;
• Construction, or generation of energy, from nuclear power plants;
• Any project or activity that directly or indirectly violates the rights of indigenous peoples,  and traditional peoples and communities;
• Any project or activity that is directly or indirectly linked to human rights violations, child labour and forced labour;
• Direct Waste incineration;
• Production or commercialization of any product or activity considered illegal under national or international laws or regulations, conventions and agreements signed by Brazil.

Environmental and social risks associated with expenses that were made possible due to the net proceeds from sustainable bonds, will be monitored by CFSS. The relevant Ministries responsible for implementing these activities will identify and manage such risks within the scope of the current public policies.

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