PRE-ISSUANCE VERIFICATION REPORT
Limited Assurance Procedure based on Climate
Bond Standard version 2.1
By VIGEO EIRISFor the Republic of Chile’s 2019 first Green Bond issuanceMay 9, 2019SCOPE
The Republic of Chile is considering the issuance of its first 2019 Green Bond (hereafter “Bond”) and intends to use
the proceeds to finance or refinance the construction and operation of transportation, solar energy, green buildings,
and water management projects (the “Eligible Green Expenditures”).
In this context, Vigeo Eiris (the “Verifier”) has been commissioned, as an independent third-party provider approvedby the Climate Bonds Standard Board, by the Republic of Chile (the “Issuer”) to perform the Pre-Issuance
Verification of the Bond. This verification has been conducted in accordance with the Climate Bonds Standard(CBS) version 2.1 requirements [i.e. Part A: General requirements to be applied for all Climate Bonds, Part B:
Climate Bonds Standard: Solar Sector Criteria Version 2.1 (June 2018), Low Carbon Land Transport Criteria
Version 1.0 (February 2016), Low Carbon Buildings Criteria (September 2018) and Water Infrastructure Criteria(April 2018)].
The work undertaken by Vigeo Eiris to form this verification report included:-

Planning and management of the verification.
Desk review of the Bond and associated documentation provided by the Issuer.
Interviews of the Issuer’s managers related to the Eligible Green Expenditures to be financed by this Bond.
Assessment of evidences provided by the Republic of Chile against the Climate Bond Standard 2.1.
Internal quality control on the assurance report and conclusions.
Provision of Vigeo Eiris’ Limited Assurance Report.

We have conducted our pre-issuance verification from March 18th to May 9th, 2019. The methodology, criteria,findings and assurances addressed by this Limited Assurance Procedure are in accordance with relevant generalprinciples & professional standards of independent auditing, and in line with the International Standard on
Assurance Engagements other than Audits or Reviews of Historical Financial Information (ISAE 3000).
RESPONSIBILITIES OF THE ISSUER AND OF VIGEO EIRISThis statement relies on the information provided by the Issuer to the Verifier: documentation, interviews withmanagers involved in the Bond issuance and related Eligible Green Expenditures, and explanations presented
during the assessment, based on the understanding that this information was provided to Vigeo Eiris in good faith.
Vigeo Eiris has not performed an audit nor other test to check the accuracy of the information provided by theIssuer.
The Issuer is fully responsible for attesting the compliance with its commitments as defined in its policies, for theirimplementation and their monitoring, and for the information provided.
PRE-ISSUANCE VERIFICATION
Based on the supporting elements and explanations provided by the Issuer, nothing has come to our attention thatcause us to believe that, in all material respects, the Republic of Chile’s 2019 first Green Bond is not in conformancewith the Climate Bonds Standard’s Pre-Issuance Requirements (version 2.1) and with associated relevant sectorspecific technical criteria. This level of assurance applies altogether to the Eligible Green Expenditures, theenvironmental benefits of the Bond, the evaluation and selection process of the assets, the proposed financial
accounting system, and the monitoring & reporting system associated to the Bond, to be implemented over the termof the Bond.
This Report is valid as of the date of issuance limited to the Republic of Chile’s 2019 first Green Bond. It is provided by
Vigeo Eiris to the Issuer and the Climate Bond Initiative.
Project team

For more information, contact:

Adriana Cruz Félix

Amaya London

Paul CourtoisierSustainability Consultant
Project Leader

Sustainability Consultant

Head of sustainability bonds & loans(+33) 6 85 35 43 51
paul.courtoisier@vigeo-eiris.com

Muriel Caton

Carlos Araujo

Director Sustainable Finance Strategy
Supervisor

Sustainability Consultant

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Disclaimer
Transparency on the relation between Vigeo Eiris and the Issuer: Vigeo Eiris has not executed any audit mission or consultancy
activity for the Republic of Chile until so far and no established relationship (financial or other) exists between Vigeo Eiris and theRepublic of Chile.
This Assurance Report is a document prepared by the Verifier that conveys the Verifier’s opinion on the Bond alignment with therelevant requirements of the Climate Bonds Standard, but it does not provide Climate Bonds Certification itself. Providing thisopinion does not mean that Vigeo Eiris certifies the tangibility, the excellence or the irreversibility of the projects financed by theBond. No assurance is provided by Vigeo Eiris regarding the financial performance of the Issuer nor of the Bond, nor the value of
any investment in the Bond, nor of the environmental footprint of the Bond or the compliance with the commitments taken by theIssuer.
Vigeo Eiris cannot be liable for any loss suffered as a result of information or data provided by the Issuer. Vigeo Eiris is not liable
for the induced consequences when third parties use this opinion either to make investments decisions or any kind of business
transaction.
Restriction on Distribution and Use of this Limited Assurance Report: at the discretion of the Issuer.

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VERIFICATION CRITERIA & FINDINGS
Context Note: The Republic of Chile has declared that the Net Proceeds of its 2019 first Green Bond will beallocated to 14 Eligible Green Expenditures from the following CBI categories: Solar Energy, Low Carbon Land
Transport, Commercial Low Carbon Buildings and Water Infrastructure as described in the Republic of Chile’s
Green Bond Framework, dated 8th May 2019.
The evidence, information and explanations supporting the Bond issuance provided by the Republic of Chile toVigeo Eiris were both historical (for projects selection process and nominated projects) and hypothetical or projected(for the expected environmental benefits, the proposed financial accounting system, and the monitoring & reporting
system associated to the bond, to be implemented over the term of the bond).
The Issuer showed a high responsiveness in providing information to the Verifier. We believe that the procedures
we have performed and the evidence we have obtained are sufficient and appropriate to provide a basis for our
findings.

Summary criteria for assertions of compliance with the pre-issuance requirements of Climate Bonds Standard
version 2.1
Vigeo Eiris has assessed the Republic of Chile’s 2019 first Green Bond and the nominated projects and assets
against criteria and requirements detailed within the Climate Bonds Standard version 2.1:•

Part A: General requirements to be applied for all Climate Bonds
1.
2.
3.

•

Selection of Nominated Projects & Assets
Internal Processes & Controls
Reporting Prior to IssuancePart B: Climate Bonds Standard: Solar Sector Criteria Version 2.1 (June 2018), Low Carbon Land
Transport Criteria Version 1.0 (February 2016), Low Carbon Buildings Criteria (September 2018) and
Water Infrastructure Criteria (April 2018).

Assessment of the Republic of Chile’s 2019 first Green Bond against Pre-Issuance Requirements of Climate
Bond Standard
Part A: General Requirements
1. Selection of Nominated Projects & Assets
Clause 1.1
1.1. Check for proof of existence of documented decision-making process which is used to determine the eligibilityof Nominated Projects and Assets:
The Issuer has established, documented and committed to maintain the decision-making process, which has beenused to determine the eligibility of the Nominated Eligible Green Expenditures within its Green Bond Framework(the “Framework”).
-

1.1.1.

The evaluation and selection of Eligible Green Expenditures are based on relevant internal and external
expertise with well-defined roles and responsibilities and is reasonably structured. The Issuer has createdan inter- ministry committee, the Green Bond Committee, led by the Ministry of Finance with the supportof the Ministry of Environment and composed of representatives responsible for the execution of the publicbudget of the Ministry of Environment, the Ministry of Public Works, the Ministry of Energy, the Ministry ofTransport, the Ministry of Agriculture, and any other relevant ministry in charge of an Eligible Green
Expenditure. The Committee is responsible for selecting the Eligible Green Expenditures to be (re)financedby the Bond and to ensure the respect of the eligibility criteria defined in the Framework. The processincludes:a statement on the environmental objectives of the bond

Measurable and relevant environmental objectives have been identified by the Issuer in its Framework and in theGreen Portfolio:-

Reduction and/or avoidance of greenhouse gas (GHG) emissions
Improvement of air quality (reduction and/or avoidance)
Conservation and sustainable use of water resources
Energy savings

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1.1.2.

a process to determine whether the Nominated Projects & Assets meet the eligibility requirements
specified in Part B (Eligibility) of the Climate Bond Standard

The Issuer has stated that 100% of the net proceeds from its first Bond will be used to finance and refinance a
Green Portfolio comprised of existing and future Eligible Green Expenditures corresponding to four of the six
categories defined in the Green Bond Framework, namely:- Renewable Energy- Clean Transportation- Green Buildings- Water Management

All selected Eligible Green Expenditures to be (re)financed by the Bond meet the eligibility requirements of thefollowing Climate Bonds Standard Sector Criteria:-

Solar Projects - Sector Criteria for Solar (version 2.1): Eligible Green Expenditures falling in this category
will not have more than 15% of electricity generated from non-renewable sources.

-

Public Passenger Transport Projects - Low Carbon Land Transport (Version 1.0): Eligible Green
Expenditures falling in this category are automatically eligible for Certification.

-

Public Building certification Projects - Low Carbon Buildings Criteria (September 2018): Eligible Green
Expenditures falling in this category will only cover Green Building construction and retrofits with anassociated 30% carbon reduction target based on the Chilean national building certification scheme"Certificación Edificio Sustentable".

-

Water monitoring Projects - Water Infrastructure Criteria (April 2018): Eligible Green Expenditures fallingin this category are automatically eligible for Certification.

Clause 1.2 The Issuer shall assess that all proposed Nominated Projects & Assets to be associated with the bondmeet the bond’s documented objectives as stated under Clause 1.1 and are compliant under Part B of the Climate
Bond Standard.
The Issuer has committed to assess all proposed Nominated Projects & Assets (Eligible Green Expenditures) to be
associated with the Bond’s Green Portfolio and to calculate the estimated climate benefits as stated under 1.1.
The Green Bond Framework states that the Green Bond Committee will review the compliance of Eligible Green
Expenditures with the eligibility criteria. In addition, the Republic of Chile has an Environmental Impact Evaluation
System (SEIA, in Spanish) setting common criteria for evaluating all projects and activities carried out in the country(both in the public and private sectors), with the reported objective of ensuring the protection of the environment.

Clause 1.3 The Issuer shall document the Nominated Projects & Assets which are proposed to be associated withthe bond and which have been assessed as likely to be Eligible Projects & Assets. The Issuer shall establish a listof Nominated Projects & Assets which can be kept up-to-date during the term of the bond.
The Issuer has transparently provided Vigeo Eiris with a list of 14 Eligible Green Expenditures corresponding tofour of the six categories defined in the Green Bond Framework and commits to maintain updated the list throughout
the life of the Bond.

Clause 1.4 Nominated Projects & Assets shall not be nominated to other Climate Bonds unless it is demonstrated
by the Issuer that distinct portions of the Nominated Projects & Assets are being funded by different Climate Bonds
or that the existing Climate Bond is being refinanced via another Climate Bond.
According to the Issuer, Eligible Green Expenditures have never been nominated to other Climate Bonds or thatthe existing Climate Bond is being refinanced via another Climate Bond. This can be confirmed through the absenceof the Eligible Green Expenditures within the Climate Bonds Initiative’s database.

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Clause 1.5 The expected Net Proceeds of the bond shall be no greater than the Issuer’s debt obligation to the
proposed Nominated Projects & Assets, or the Fair Market Value of the proposed Nominated Projects & Assets.
The expected Net Proceeds of the Bond will not be no greater than the Issuer’s debt obligation to the proposed
Eligible Green Expenditures, or the Fair Market Value of the proposed Eligible Green Expenditures.

Vigeo Eiris reviewed the above elements based on the information and documentation provided by theIssuer during the verification, and nothing has come to our attention that causes us to believe that, in allmaterial respects, the Republic of Chile’s 2019 first Green Bond is not in conformance with the Climate
Bonds Standard’s Pre-Issuance Requirements (version 2.1) stated in section 1 “Selection of NominatedProjects & Assets”.

2. Internal Processes & Controls
Clause 2.1: The systems, policies and processes to be used for management of bond funds and investments madeshall be documented by the Issuer and disclosed to the Verifier and shall include arrangements for the following
activities.
The Issuer has described the systems, policies and processes to be used for the management of the Bond’s funds
and investments in its Green Bond Framework.
2.1.1. Tracking of proceeds: The Net Proceeds of the bond can be credited to a sub-account, moved to a subportfolio, or otherwise tracked by the Issuer in an appropriate manner and documented.
The Issuer reports that the Net Proceeds of the Bond will be managed by the Ministry of Finance, which will verify
that the allocation of the Bond's net funds coincides nominally with the disbursements made to the Eligible Green
Expenditures, until the total allocation of funds.
2.1.2. Managing unallocated proceeds: The balance of unallocated Net Proceeds can be managed as per therequirements in Clause 6.2.
The Issuer reports that the unallocated proceeds will be held in the General Account of Chile1 in instruments issued
by the Central Bank of Chile, repurchase agreements, bank term deposits, mutual funds investing in short-term
debt instruments, sovereign titles, among others.
2.1.3. Earmarking funds to Nominated Projects & Assets: An earmarking process that can be used to manage andaccount for funding to the Nominated Projects & Assets and enables estimation of the share of the Net Proceeds
being used for financing and refinancing.
The estimated share of refinancing is expected to represent approximately 13% of the Net Proceeds being used forfinancing and refinancing.

Vigeo Eiris reviewed the above elements based on the information and documentation provided by theIssuer during the verification, and nothing has come to our attention that causes us to believe that, in allmaterial respects, the Republic of Chile’s 2019 first Green Bond is not in conformance with the Climate
Bonds Standard’s Pre-Issuance Requirements (version 2.1) stated in section 2 “Internal Processes &Controls”.

1

The investment of the Chile's General Account (Recursos Generales de la Nación) is regulated by article 12 of the Law No. 20,128 on Fiscal
Responsibility, which establishes that the investment of the resources shall be defined by the Minister of Finance, in accordance with the powers
and rules regulating the investment of resources, contained in article 3 of Decree-Law No. 1,056 of 1975, and subsequent amendments.

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3. Reporting prior to issuance
Clause 3.1. The Issuer shall disclose in the Bond Disclosure Documentation:
3.1.1. The investment areas, as provided in Clause 9.1, into which the Nominated Projects & Assets fall.
The Issuer has stated that 100% of the net proceeds from its first Bond will be used to finance and refinance a
Green Portfolio comprised of existing and future Eligible Green Expenditures corresponding to four of the six
categories defined in the Green Bond Framework, namely:- Renewable Energy- Clean Transportation- Green Buildings- Water Management
All selected Eligible Green Expenditures to be (re)financed by the Bond meet the eligibility requirements of thefollowing Climate Bonds Standard Sector Criteria:-

Solar Projects - Sector Criteria for Solar (version 2.1): Eligible Green Expenditures falling in this category
will not have more than 15% of electricity generated from non-renewable sources.

-

Public Passenger Transport Projects - Low Carbon Land Transport (Version 1.0): Eligible Green
Expenditures falling in this category are automatically eligible for Certification.

-

Public Building certification Projects - Low Carbon Buildings Criteria (September 2018): Eligible Green
Expenditures falling in this category will only cover Green Building construction and retrofits with anassociated 30% carbon reduction target based on the Chilean national building certification scheme"Certificación Edificio Sustentable".

-

Water monitoring Projects - Water Infrastructure Criteria (April 2018): Eligible Green Expenditures fallingin this category are automatically eligible for Certification.

3.1.2. The intended types of temporary investment instruments for the management of unallocated proceeds inaccordance with Clause 2.1.2.
The Issuer reports that the unallocated proceeds will be held in the General Account of Chile2 in instruments issued
by the Central Bank of Chile, repurchase agreements, bank term deposits, mutual funds investing in short-term
debt instruments, sovereign titles, among others.
3.1.3. The approach the Verifier has taken to pre-issuance procedures (i.e., whether an Assurance Engagement oran Agreed-Upon Procedures Engagement was undertaken).
The Issuer has appointed Vigeo Eiris as an approved CBI Verifier for the review of The Republic of Chile’s
Framework and conformance with the Climate Bonds Standard. The Pre-Issuance review is conducted following a
Limited Assurance procedure.
3.1.4. Whether periodic Assurance Engagements will be undertaken during the term of the bond to reaffirm
conformance with the Climate Bonds Standard, and the expected frequency of any periodic Assurance.
The Issuer commits to appoint an approved CBI Verifier to conduct the Post-Issuance compliance review within aperiod of one year after the issuance, in conformance with the Climate Bonds Standard requirement.

Vigeo Eiris reviewed the above elements based on the information and documentation provided by theIssuer during the verification, and nothing has come to our attention that causes us to believe that, in allmaterial respects, the Republic of Chile’s 2019 first Green Bond is not in conformance with the Climate
Bonds Standard’s Pre-Issuance Requirements (version 2.1) stated in section 3 “Reporting to issuance”.

2

The investment of the Chile's General Account (Recursos Generales de la Nación) is regulated by article 12 of the Law No. 20,128 on Fiscal
Responsibility, which establishes that the investment of the resources shall be defined by the Minister of Finance, in accordance with the powers
and rules regulating the investment of resources, contained in article 3 of Decree-Law No. 1,056 of 1975, and subsequent amendments.

6/8

PART B: Climate Bonds Standard Sector Specific Criteria
1.

Technical criteria for Eligible Projects & Assets: Solar Sector Criteria Version 2.1 (June 2018), Low
Carbon Land Transport Criteria Version 1.0 (February 2016) Low Carbon Buildings Criteria (September2018) and Water Infrastructure Criteria (April 2018).

As indicated in the Framework selected Eligible Green Expenditures fall under the following sector specific technicalcriteria of the Climate Bonds Standard:
1.1 Solar Projects – Sector Criteria for Solar (version 2.1)-

Onshore solar electricity generation facilities (construction and operation of an onshore solar PV
plant).
-

Eligible Green Expenditures will not have more than 15% of electricity generated from nonrenewable sources.

1.2 Public Passenger Transport – Sector Criteria for Low Carbon Land Transport (Version 1.0)-

Electric Public trains (Metro): Eligible Green Expenditures falling in this sub-category areautomatically eligible for Certification under Low Carbon Land (Version 1.0).

-

Electric Buses: Eligible Green Expenditures falling in this sub- category are automatically eligible
for Certification under Low Carbon Land Transport (Version 1.0).

-

Dedicated infrastructure for electrified public transport: Eligible Green Expenditures falling in thissub- category are automatically eligible for Certification under Low Carbon Land Transport(Version 1.0).

1.3 Buildings (Commercial buildings) Projects – Sector Criteria for Buildings-

Public Building certification (CES)-Eligible Green Expenditures falling in this category will only cover Green Building
construction and retrofits with an associated 30% carbon reduction target based on the
Chilean national building certification scheme "Certificación Edificio Sustentable".

1.4 Water Projects – Sector Criteria for Water Infrastructure-

Water monitoring facilities-

Eligible Green Expenditures falling in this sub- category are automatically eligible for
Certification under the Water Infrastructure Criteria (April 2018).

Vigeo Eiris reviewed the above elements based on the information and documentation provided by theIssuer during the verification, and nothing has come to our attention that causes us to believe that, in allmaterial respects, the Republic of Chile’s 2019 first Green Bond is not in conformance with the Climate
Bonds Standard’s Pre-Issuance Requirements (version 2.1) stated in section “Technical criteria for Eligible
Projects & Assets”.
List of supporting elements provided by the Issuer and interview plan:•

Supporting documents provided for Pre-issuance verification and confirmed by the Issuer:
Green Bond Framework (dated 8th May 2019)
List of Eligible Green Expenditures for the first Green Bond (the “Green Portfolio”).
Answers to Vigeo Eiris’ questionnaire-•

Environmental Quality and Energy Efficiency National Certification System for Public Buildings:
Manual Evaluation and Qualification Version 1, May 2014

List of interviewees:-

Representatives of the Ministry of Finance:
Joaquin Guajardo (Economist)
Victor Gonzalez (Economist)
Jaime Tramón (Lawyer)
Patricio Sepúlveda (Economist)-

Representatives of the Ministry of Environment
Alfonso Galarce (Public Administrator)
Sergio Sanhueza Triviño (Forestry
Engineer)7/8Vigeo Eiris is a global provider of environmental, social and governance (ESG) research to investors andpublic and private corporates. The agency evaluates the level of integration of sustainability factors into
organisations’ strategy and operations and undertakes a risk assessment to assist investors andcompanies’ decision-making.
Vigeo Eiris offers a wide range of services: For investors: decision making support covering all sustainable and ethical investment
approaches (including ratings, databases, sector analyses, portfolio analyses, structured
products, indices and more).
 For companies & organisations: supporting the integration of ESG criteria into business
functions and strategic operations (including sustainable bonds, corporate ratings, CSR
evaluations and more).
Vigeo Eiris is committed to delivering client products and services with high added value: a result ofresearch and analysis that adheres to the strictest quality standards. Our methodology is reviewed by anindependent scientific council and all our production processes, from information collection to service
delivery, are documented and audited. Vigeo Eiris has chosen to certify all its processes to the latest ISO
9001 standard. Vigeo Eiris is an approved verifier for CBI (Climate Bond Initiative). Vigeo Eiris’ researchis referenced in several international scientific publications.
With a team of more than 240 experts of 28 different nationalities, Vigeo Eiris is present in Paris,
London, Boston, Brussels, Casablanca, Hong Kong, Milan, Montreal, Rabat, Santiago and Stockholm.
The Vigeo Eiris Global Network, comprising 6 exclusive research partners, is present in Australia, Brazil,
Germany, Israel, Japan and Mexico.

For more information: www.vigeo-eiris.com

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