Inter-American Investment Corporation is helping companies in Latin America and the Caribbean bring about US$1 billion of environmental, social and governance bonds as sustainable financing gains traction in the regions.
That’s equivalent to about 60 percent of all ESG bonds in which the multilateral bank, known as IDB Invest, has participated in during the past six years, an official said in an emailed reply to questions. IDB Invest, which is part of the Inter-American Development Bank group, provides debt and equity financing as well as advisory services to private sector companies operating in the region.
“I do see a vast majority of our business” related to sustainability, Chief Executive Officer James Scriven said in an interview. “This is the future of our institution, linking development assets to development investors with a sustainable theme.”
The US, Argentina, Brazil, Mexico and China are among 47 countries that own the lender, which is in a process of increasing its focus on ESG financing in Latin America and the Caribbean. Specifically, the lender helps companies structure bonds, adds guarantees to some issues in addition to investing in a portion of the debt offerings.
The current pipeline of ESG bonds is comprised of six to eight transactions, of which two or three will be sustainability-linked where the interest rate can rise if the issuer fails to meet certain metrics.
Also, the lender is advising companies on so-called blue bonds, or potential transactions whose use of proceeds are earmarked to protect oceans. IDB Invest is currently looking at projects in Ecuador, Colombia, Brazil and the Caribbean in tourism, the food industry and the banking sector.
IDB Invest has been using a proprietary tool known as Delta for seven years to assess the social and environmental impact of projects’ operations during the structuring phase, tracking results achieved over time. The Delta score is updated annually to reflect actual performance of the deal relative to expectations.
by Esteban Duarte, Bloomberg