Regulatory transparency and cost of ESG debt: Evidence from Latin America and Caribbean

• ESG bonds in LAC exhibit a significant pricing premium • The greenium averages about 100 basis points at issuance • Stronger disclosure rules reduce ESG bond spreads • Effects are larger for high-yield and local-currency bonds • Regulatory transparency lowers financing frictions in LMICs Low- and middle-income countries face climate vulnerability and institutional constraints that hinder sustainable finance. Using bond-level data from Latin America and the Caribbean, this paper examines whether ESG bonds command a pricing advantage and whether regulatory transparency reduces financing frictions. We document a greenium of roughly 100 basis points relative to matched conventional bonds. We further construct an index of ESG disclosure regulation and show that stronger frameworks reduce ESG bond spreads by up to 33 basis points, with larger effects for high-yield and domestic-currency issuances. These findings highlight the role of regulatory transparency in lowering perceived risk and supporting climate finance in emerging markets.