With IDB support, Banco do Brasil qualifies for sustainable bonds market

Banco do Brasil, Latin America’s largest financial institution, completed its preparations to enter the market for sustainable bonds and has counted, for that, with the support of the Inter-American Development Bank (IDB). The objective is to seek the synergy between BB's experience in financing sustainability and the growing international and national appetite for investments that, in addition to financial return, generate social and environmental benefits.

One of the steps prior to the launch of the bonds, the elaboration of a framework, has already been completed. The document guides the issuance of this type of paper and provides guidelines on which types of assets can be classified as sustainable, aligning them with the UN Sustainable Development Goals (SDGs).

Among the highlights of BB's Sustainable Finance Framework is the inclusion of low-carbon agriculture operations – an approach still little seen nationally and globally. Other elements more common in this market are also contemplated, such as the social aspect, accessibility, health, support to micro and small companies, microcredit, family farming and renewable energy.

The construction of the document had the assistance of the IDB and the support of the company Sitawi Finanças do Bem. In addition, the final version was submitted to the second-party opinion of Sustainalytics, with a favorable opinion.

Diversification

Internally, Banco do Brasil also approved a Sustainable Finance Model that includes issues of Sustainability-Linked Loans (SLL) and Sustainability-Linked Bonds (SLB).

These debt formats link the financial cost of the transaction to the performance of ESG indicators (environmental, social and governance) pre-established by the borrower, such as the evolution in the zero-carbon agenda, the increase of the diversity in committees and the reduction of exposure in carbon-intensive credit portfolios.

The issuance of the bonds may occur throughout 2021, on a date to be defined according to the needs of BB and the time of the market, in the modalities of refinancing the loan portfolio and/or financing new projects.
BB’s Vice President of Agribusiness and Government, João Rabelo, highlights that BB has already a strong role in sustainability, but that it will intensify its performance, to continue as the protagonist of this agenda.

“We recently launched 10 long-term commitments, so that we can further assist clients and investors in the transition to a more sustainable portfolio, with positive socioenvironmental externalities", says Rabelo.
 
BB's Finance Director, Maurício Nogueira, assesses that the initiative expands the fundraising alternatives available in the capital market. "The new structure also favors access to investors with mandates related to sustainability, contributes to the management of climate risks, to better regulatory compliance, in addition to benefiting better financial performance and return to shareholders and society," says Nogueira.

For the Inter-American Development Bank, it is very strategic to help BB take advantage of this trend, says Morgan Doyle, IDB representative in Brazil.

“More and more, investors want to know if their money is helping to improve the planet, and several Brazilian assets, including those related to agribusiness, contribute to this purpose. When entering the thematic bonds market, Banco do Brasil translates this awareness into resources for projects with relevant benefits to the country”, concludes Doyle.