Agreement Number 637-2024

Honduras approves a framework to issue green, social, and sustainable bonds that finance climate, renewable energy, housing, education, and health projects. The government can use these bonds in international markets following certified international standards, with the goal of reducing poverty and fighting climate change.

Whereas Article 33 of the General Law of Public Administration indicates that Secretaries of State are collaborators of the President of the Republic in the dispatch of public affairs and in the guidance, coordination, direction and supervision of the organs of the centralized Public Administration and the coordination of decentralized entities or organs or of decentralized institutions, in the areas of their competence.

Whereas the General Law of Public Administration in Article 36, numerals 1 and 8, indicates that among the attributions and duties of the Secretaries of State is that of guiding, directing, coordinating, supervising and controlling the activities of their respective offices, without prejudice to the attributions that the Constitution and the laws confer on other organs, as well as issuing agreements and resolutions in matters of their competence and those delegated to them by the President of the Republic, and ensuring their execution. The signature of the Secretaries of State in these cases shall be authorized by the respective Secretary Generals.

Whereas the Organic Law of the Budget in Article 77 authorizes the Secretary of State in the Office of Finance to place titles of Public Debt in the capital markets directly or through the Central Bank of Honduras.

Whereas Article 313 of the General Provisions of the Budget, Fiscal Year 2024, indicates that the Secretary of State in the Office of Finance may undertake actions that allow the management of liabilities of public debt, among these, debt exchange by nature, issuance of thematic bonds and debt forgiveness mechanisms for environmental purposes, which serve to finance initiatives for sustainable economic growth.

Whereas Article 209 of the General Provisions of the Budget, Fiscal Year 2024, authorizes the Secretary of State in the Office of Finance, to issue, if necessary, in the international capital market, Sovereign or Thematic Bonds, charged to the amount of indebtedness authorized in this budget, under the modality of reopening or new issuance and financial conditions prevailing in the market at the time of negotiation, and may be placed with premium, discount or par.

Whereas the State of Honduras has the responsibility to guarantee the adoption of practices and measures aimed at reducing climate vulnerabilities, as well as improving adaptation capacities and mitigation proposals in the face of the effects produced by climate change resulting from greenhouse gas emissions and other products of inadequate environmental management.

Whereas Honduras is a party to the Paris Agreement on climate change and has committed to taking ambitious measures to combat climate change and adapt to its effects, with a clear focus on environmental sustainability and the reduction of greenhouse gas emissions, establishing national objectives of determined contributions (NDC).

Whereas the issuance of sovereign bonds linked to sustainability must be aligned with the principles and standards established by the International Capital Market Association (ICMA), which promotes responsible and transparent investment practices in global capital markets, including the obligation to report the environmental impact and effectiveness of financed projects.

Whereas the Secretary of State in the Office of Finance with the support of the United Nations Development Programme (UNDP) undertook the necessary actions for the preparation of a reference framework for green, social and sustainable bonds in order to have an instrument that allows defining activities and facilitates the identification of expenses associated with the issuance of thematic bonds by the Government of Honduras.

Whereas the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras is the instrument linked to the Sustainable Development Goals (SDG), and at the same time is aligned with the main international market standards recognized by ICMA, the Green Bond Principles 2021 (GBP), the Social Bond Principles 2021 (SBP) and the Sustainable Bond Guidelines 2021 (SBG) of ICMA.

Whereas the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras defines good practices on the issuance of such bonds, among which are detailed the use of resources, resource management, reporting, external review and the process of evaluation and selection of Eligible Green Expenses and Eligible Social Expenses.

Whereas the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras has the Second Opinion (SPO) from Standard & Poor's Global Ratings, certifying that it complies with the Social Bond Principles, ICMA, 2023, Green Bond Principles, ICMA, 2021 (with Appendix 1 of June 2022) and the Sustainable Bond Guidelines ICMA, 2021. The certification of the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras comprises a comprehensive analysis of best practices in the use of funds, process for the evaluation and selection of the project, administration of funds, reporting, categorization and analysis of eligible projects, as well as other relevant analytical considerations.

Whereas numeral 5 of Article 82 of the Organic Law of the Budget establishes as an attribution of the General Directorate of Public Credit, as the Technical Coordinating Organ of the Subsystem of Public Credit, a dependency of the Secretary of State in the Office of Finance, the standardization of the procedures for the placement of titles, bonds or obligations of public debt.