Sustainable bond framework helps raise over US$5bn for private sector projects in Latin America and the Caribbean
Published: Sep 2024
Best Sustainable Treasury Solution
Highly Commended Winner
IDB Invest
Janne Sevanto
Treasurer
IDB Invest is a Multilateral Development Bank and the partner of choice for private sector companies in Latin America and the Caribbean. The institution finances private sector projects to advance the economic and social development of countries in Latin America and the Caribbean, by advancing clean energy, modernising agriculture, strengthening transportation systems and expanding access to financing.
The challenge
Relative to its peers, IDB Invest is a smaller, fast-growing development finance institution, and a relatively new issuer in the capital markets. Following the consolidation of IDB Group’s private sector activities within IDB Invest that led to a significant expansion of its development mandate, the organisation wanted to grow its funding programme, boost its branding in capital markets, and raise institutional funding in a crowded debt capital market that included big players like the EIB, World Bank and KfW. IDB Invest created a Sustainable Debt Framework that would allow it to issue green, social and sustainability bonds and provide investors with a single, integrated allocation and impact report.
The framework connects IDB Invest’s mission as an impact driven institution with its capital markets branding, leveraging the company’s strength in the client business to create a strong issuer profile and expand its funding toolbox, incorporating best practices, innovative elements and efficiency aspects.
The solution
IDB Invest’s Sustainable Debt Framework is designed to comply with global best practices, specifically the Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines sponsored by the International Capital Markets Association (ICMA). The Framework was externally reviewed to assess IDB’s impact reporting and use of funds. The framework increases the appeal to the strictest ESG and impact investors, explains Janne Sevanto, Treasurer.
“To maximise efficiency, we created a module in our debt origination system to label every eligible project according to the categories in our framework and to automate allocation and impact reporting,” says Sevanto.
Targeted benefits:
Increased visibility through labelling as green, social and sustainability bonds.
Expanded investor reach into impact and ESG oriented investors through sustainability label.
Demonstration effect and increased credibility towards their clients.
Best practice and innovation
From the outset IDB Invest targeted a best in class solution by:
Integrating green, social and sustainability bond issuances in a single framework.
Strictly abiding by the green bond principles, social bond principles and sustainability bond guidelines issued by the ICMA.
Requesting a second party opinion for its framework and an external review for the accuracy and compliance of its allocation and impact report.
“We intentionally included innovative elements to promote our strong brand positioning as a leading multilateral development bank in Latin America and the Caribbean,” says Sevanto.
Reporting of realised, actual impact instead of only expected impact that most issuers opt for.
Use of the framework to pioneer sustainable bonds in the region including: first gender bond issued by a Multilateral Development Bank in Mexico, first blue bond in Latin America and the Caribbean, first Silver Bond in Latin America and the Caribbean.
The implementation window of this initiative extended over three years since the creation of the Framework in 2021 to the implementation of the integrated project categorisation and impact reporting in 2023. The extended time allows to appreciate the impressive impact of the initiative on IDB Invest’s funding capability, its capital markets branding and its ability to provide excellent investor reporting.
Key benefits
Cost savings.
Process efficiencies.
Increased automation.
Risk mitigated.
Improved visibility.
Manual intervention reduced.
Future-proof solution.
Improved key performance indicator (KPI) metrics.
The sustainable bond framework has helped to raise over US$5bn in sustainable debt since 2021.
The implementation of the framework was led by a two-person team that worked closely with internal and external stakeholders to produce a best in class solution.
It was instrumental to positioning IDB Invest as leading sustainable bond issuer: within three years, 66% of all IDB Invest outstanding bonds are green, social and sustainability bonds, sending a strong signal to the market in line with the developmental mission of the institution.
The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards
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