Bankers without Boundaries Talk Series: Djellil Bouzidi, Ph.D | Emena Advisory

The BwB Talk Series is where we bring innovative leaders in impact, finance, and the environment to speak with our network around the world. The BwB Talk Series helps generate new ideas for our network by bringing experts to share their deep knowledge of sustainability topics


During its most recent BwB Talk Series, BwB was pleased to welcome Dr. Djellil Bouzidi.


Dr. Bouzidi is a Managing Partner at Emena Advisory, a sustainable finance and capital markets consulting firm that puts “creative thinking at the heart of its business model”. On March 2nd, 2022, Chile became the first country in the world to issue the Sovereign Sustainability-linked Bond (SSLB) to fund its climate initiatives and fuel its green energy transition. Dr. Bouzidi, who assisted with the structuring of this transaction, presented his talk titled, “Sovereign Sustainability-linked Bonds: Chile's Innovation Story”.


“If sovereigns are serious enough about their objectives, they must tell the market and tell the investors that, for them, not achieving their voluntary sustainability performance target is as bad as losing one or two credit notches. Because they know this issue is important, they will pay the amount of step up that they will have to face if they lose this credit notch.”


- Dr. Djellil Bouzidi


Core take-aways from Dr. Djellil Bouzidi’s presentation mentioned:

  • Several preceding events helped the sustainability linked bond market to develop. From the period of 2014 to 2020, the road to the SSLB has been paved by colleague collaborations, discussions, policy papers and international conventions for the environment. It was through these collaborations that the idea for SSLBs was developed, promoted and scaled. Patricio Sepúlveda (Head of the Public Debt Office) and the Chilean Ministry of Finance’s Public Debt Office were instrumental in moving the SSLB from theory to practice. The team acted quickly to take this innovative step forward and will likely play a key role in promoting these instruments regionally and globally.


  • In 2022, Chile set a high bar with their SSLB. The structuring of an SLB is critical. An SLB can be effective, but any error can be financially devastating, therefore accurate Key Performance Indicators (KPIs) and sustainability performance targets are essential. In the case of Chile, probability and quantitative modeling was used to structure the SSLB, thereby allowing experts to input the probability of various scenarios. TENOKONDA and Denis Papaioannou (Co-Founder and Director at TENOKONDA) partnered with Emena Advisory to apply an original Bayesian risk approach to the modeling.


  • It is important to keep in mind that there are barriers or challenges that must be considered with SSLBs.

  • The initial challenges are in defining the desired objectives for the SSLB.

  • Additionally, one must develop the structuring details to capture the appropriate KPIs, currency, maturity, probabilistic approach, and other intricacies.

  • The third challenge would be the risks that need to be managed before and after issuance.

  • The Future has much in store including the launch of a Sustainability-linked Sovereign Debt Hub, other emerging economies with good execution capacities developing SLBs, and the ongoing debate between Green Bonds and SLBs.

An interesting Q&A segment followed the talk. One of these moments was a question on what conditions could encourage the further proliferation of SLBs.


BwB’s Harry Wain (Analyst) asked which elements could encourage the development of other SLBs and the growth of this market. Dr Bouzidi responded that SLBs are traditionally structured through the government’s ministry of finance. In this way, collaboration between ministries is required, for example – through a simple emphasis on a shared ambition towards climate conventions. A simple KPI is also useful, such as a clear and ambitious KPI related to GHG emissions’ reduction. A step up must be proportional to the amount of additional funding one will have to pay if they lose one or two notches of their credit rating.


BwB’s Chris Smith (Managing Director, Global Head Debt Finance) asked how we can change the mindset around basis points (BPs). The current market convention appears to be settled on a coupon shift of 25 BPs based on achieving KPI. For developing and transitional economies this change could be considered nominal, whereas for a large developed economy this change is material. Dr Bouzidi responded that he communicates to sovereigns that, if they are serious enough about their objectives, they must share with the market and investors that not achieving their voluntary sustainability targets could equate to losing a credit notch. The logic would then be paying the amount of step up that one would have to face if this credit notch was lost. Following this logic, issuers who are at the last level of investment grade cannot pay 25 BPs, but must pay at least 60 BPs.


Secondly, Chris Smith observed that when it comes to countries like Chile with large renewable energy ambitions, it is clear to see how a step up (or step down) coupon associated with GHG emissions makes sense even though it is a general-purpose bond. He then asked how a country facing many challenges (not only GHG emissions) could create a use of proceeds or general-purpose angle resulting in a KPI focused on one or two targets (narrow KPIs but keeping use of purpose wide) or alternatively a narrow use of purpose to allow broad KPIs. Dr Bouzidi responded that in Chile’s case, when the SSLB was issued, there were several clear sustainability projects in the pipeline. For countries where this is not the case, it is easier to focus on the KPI. Ultimately, the government must make difficult choices and prioritize so as to decide which ESG theme to focus on:

ideally sovereigns should choose KPIs they have, for example, a 50% chance of achieving, since an STP with 90% probability of success would not be ambitious enough. There is also a tendency for the market to prefer simplicity and that could mean separate SLBs focusing on different SDG themes, although as a sovereign the two could be combined. By being innovative, a sovereign could issue an SLB that is connected to a practical pipeline of projects. As the market is still in its infancy there is plenty of room for new ideas to evolve and shape the future development.


When asked by BwB’s Rupesh Madlani (CEO, Global Head Nature & Circular Finance, Board), “What role can you see some of these hubs that have been launched by the UN and Nature Finance playing in order to help grow issuance in the space?”, Dr Bouzidi provided a clear-cut response. He believes that it is very important to train and spread technical expertise, particularly in emerging economies. This can be done by trying to change the mindset by bringing methodological and quantitative frameworks, doing pro bono work and allowing access to free material. Though they are crucial, pure investment players and banks cannot be the only stakeholders in the picture.


Keep up to date with our BwB Talk Series on our LinkedIn and Twitter. The BwB Talk Series is done periodically through the BwB network and brings together innovative thought leaders to speak with stakeholders around climate and finance issues. The BwB Talk Series supports collaborative and iterative conversations with people worldwide. Please direct any questions or requests for additional information to info@bwb.earth or your usual BwB contact.


Bankers without Boundaries, an innovator in finance, is a not for profit powered by former investment bankers to assist high impact projects that benefit the environment and social good. BwB works with local and sub- and national governments,cities, institutions,and foundations to mobilize capital advisory and research services. BwB applies financial concepts and structuring to public projects to align them with the investment needs of capital markets, thinking about risk reduction, scaling and generation of financial returns alongside broader positive co-benefits and impacts. To learn more about Bankers without Boundaries and our work, visit https://www.bwb.earth