Latin American development banks sharpen their sustainability focus

Development banks across Latin America are increasing their focus on financing linked with sustainability issues, favoring projects with a social and environmental-friendly approach.

Brazil’s state-run development bank BNDES sold a portion of its shares this week in Brazilian mining giant Vale, raising 8.1bn reais (US$1.53bn).

"More important than the numbers of this operation is the fact that BNDES is repositioning and turning its energies, knowledge and funds to the social and environmental development of our country," BNDES’s CEO Gustavo Montezano said via LinkedIn.

Producing economic impact has for years been BNDES’s chief focus but the bank is now looking to generate social and green impact as well.

As part of these efforts, BNDES received 350mn reais from the environmental ministry to finance projects in the areas of solid waste management, sanitation, air and water quality, among others.

Meanwhile, Minas Gerais state development bank BDMG, with support from the IDB, is preparing to become Brazil’s first state-run bank to issue sustainability bonds in line with the UN's Sustainable Development Goals (SDGs).

The bank has mapped social and environmental projects worth 500mn reais that can be financed with proceeds from such bonds.

In the international credit market there is major appetite for financing projects that are linked to environmental, social and governance (ESG) criteria, said BDMG president Sergio Gusmão. “The clean and renewable energy sector, for example, is particularly strategic for the process of diversifying the economic matrix of Minas Gerais,” Gusmão added.

In July, Latin American development bank CAF and Italy’s Cassa Depositi and Prestiti (CDP) signed a credit line of 100mn euros (US$118mn) to finance sustainable projects in the region that are related to energy, transport, and social and urban development.

Companies are also stepping up their focus on sustainability, including when it comes to financing.

"We have seen an increasing demand from banks and investors for sustainability policies as an evaluation criteria for investments and financing. In Europe, this is already very clear when we have contacts with investors from there, and it is only a matter of time before it is widely disseminated throughout Latin America," Harley Scardoelli, CFO of Brazilian steelmaker Gerdau, told a conference call when asked about the issue by BNamericas. 

REGIONAL INTEGRATION

Developments banks in the region are also joining forces to increase their support for integration efforts.

This week, IDB, CAF and FONPLATA launched an alliance for the integration and development of Latin America and the Caribbean, which will see them offer technical and financial support for integration projects and the generation of knowledge and applied technology.

Through the alliance, the lenders will work with countries to create a priority portfolio of infrastructure integration projects, as well as supporting reinvestment, financing and project execution initiatives.

Combined the three institutions jointly finance about 100 integration projects in the region that are worth around US$10bn.