Agreement-165-2025

This agreement establishes the Technical Committee for Thematic Bond Issuance to coordinate Honduras' issuance of green, social, and sustainable bonds. The committee oversees the selection of environmental and social projects, manages collected funds, prepares impact reports for investors, and ensures transparency according to international standards, aiming to finance sustainable development and poverty reduction initiatives.

Whereas Article 33 of the General Law of Public Administration indicates that State Secretaries 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 decentralized institutions, in the areas of their competence.

Whereas the General Law of Public Administration in its Article 36, numerals 1 and 8, indicates that among the attributions and duties of State Secretaries 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 to other organs, as well as issuing the agreements and resolutions in the matters of their competence and those delegated to them by the President of the Republic and ensuring their execution. The signature of the State Secretaries in these cases shall be authorized by the respective General Secretaries.

Whereas the Organic Law of Budget in its Article 77 authorizes the State Secretariat in the Office of Finance to place Public Debt Securities in the capital market directly or through the Central Bank of Honduras.

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

Whereas Article 322 of the General Provisions of the General Budget of Income and Expenses of the Republic, Fiscal Year 2025, indicates that the State Secretariat in the Office of Finance may carry out actions that allow the management of public debt liabilities, such as debt exchange by nature, issuance of thematic bonds and mechanisms for debt forgiveness for environmental purposes, which serve to finance sustainable economic growth initiatives.

Whereas Article 216 of the General Provisions of the General Budget of Income and Expenses of the Republic, Fiscal Year 2025, authorizes the State Secretariat in the Office of Finance to issue, if necessary, Sovereign or Thematic Bonds in the international capital market, within the amount of borrowing authorized in this budget. This issuance may be carried out under the modality of reopening or new issuance, in accordance with the market conditions prevailing at the time of negotiation, and may be placed at a premium, discount or at par.

Whereas Article 38 of the General Provisions of the General Budget of Income and Expenses of the Republic, Fiscal Year 2025, establishes that public borrowing authorized through bond issuance and loan acquisition is considered fungible from internal to external source and vice versa, with respect to the internal or external market, financial agency, source, line item, type of currency, terms and other terms that impact financing, provided that it does not exceed the total amount authorized, for which the State Secretariat in the Office of Finance shall make the corresponding budgetary modifications once resources are received. The State Secretariat in the Office of Finance (SEFIN) through the General Directorate of Public Credit may redistribute, reallocate, redirect or reject funds from external credits.

Whereas in 2015, the General Assembly of the United Nations Organization (UN) approved the 2030 Agenda for Sustainable Development that seeks to accelerate and deepen efforts to end poverty, improve the quality of life of people, increase access to justice, promote peace and care for the planet. Honduras has taken actions aimed at establishing the conditions to comply with this commitment, such as linking the Sustainable Development Goals (SDGs) to the strategic objectives of national planning instruments and the establishment of the National Commission for the 2030 Agenda. National planning for economic and social development guides its actions in strategic axes such as environmental sustainability, social protection and climate change, establishing the need to mobilize financing for projects that support these axes.

Whereas Honduras is a party to the Paris Agreement of the United Nations Framework Convention on Climate Change and has committed to adopting ambitious measures to face and adapt to the effects of climate change, with a focus on environmental sustainability, conservation of biodiversity and reduction of greenhouse gas emissions, through the establishment of Nationally Determined Contributions (NDC).

Whereas the issuance of thematic sovereign bonds must be aligned with the principles and standards established by the International Capital Markets Association (ICMA), including the Green Bond Principles 2021 (GBP), the Social Bond Principles 2021 (SBP) and the Sustainable Bonds Guidelines 2021 (SBG). These standards establish guidelines and global recommendations that promote transparency, which supports market integrity. The principles establish that issuers must publish annual reports on the use of funds until their total allocation and impact indicator reports. After issuance, it is recommended that the issuer's fund management be complemented by the use of an external auditor, or another third party, to verify internal monitoring and fund allocation of thematic bonds.

Whereas through Agreement No. 637-2024 dated September 12, 2024 and published in the Official Journal "La Gaceta" on November 18, 2024, the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras was approved, linked to the Sustainable Development Goals (SDGs), which aims to direct funds towards green and social investments and expenditures that contribute to poverty reduction, environmental sustainability and promotion of climate action.

Whereas in the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras establishes the creation of the Thematic Bonds Consultation and Support Committee (CCABT), as an instance of intergovernmental coordination and information exchange, its main purpose being to provide advisory and technical support to the Technical Committee for Issuance of Thematic Bonds (CTEBT), to ensure the consistency and effective implementation of the sustainable bonds issuance program.

Whereas for all bonds issued under the Reference Framework for Green, Social and Sustainable Thematic Bonds of the Republic of Honduras and in alignment with the standards and best practices indicated in the Green Bond Principles 2021 (GBP), the Social Bond Principles 2023 (SBP) and the Sustainable Bonds Guidelines 2021 (SBG) established by the International Capital Markets Association (ICMA), the Government of Honduras commits to providing investors with a Report on Placement, Association and Performance of Eligible Green and Social Expenditures, as well as a Report on Results and Impact. The Finance Secretariat (SEFIN) shall publish the reports and external verifications on its website, one year after issuance and annually until verifying that the net amount received from the issuance is associated.