BNDES Creates a $500 Mil Fund Focused on Renewable Energy
05/05/2017 Since 4 years

Green bonds entered the radar of the local income market in the face of growth of the instrument abroad. CPFL Renováveis had the first internationally certified debenture and BNDES, in partnership with Vinci Partners, prepares a $500 million fund to invest in sustainable energy projects. The green bond stock has doubled over the past 15 months and represents more than $200 billion.

Although it does not make a difference in terms of yield, for the issuer, the offer for this debt instrument is an opportunity to diversify the investor base by broadening the sources of funds. It is with this in mind that BNDES decided to create the fund.

André Salcedo, from BNDES’ capital market area, explains that the institution had already been investing in energy project infrastructure debentures and had seen little willingness on the part of the investor to finance a long-term project. Depending on the individual investor, who is exempt from income tax on infrastructure debentures, this market faces constraints on growth because of the appetite of the investors. The stock for this segment amounts to approximately $6.2 billion.

“What we have seen most are wind energy projects and wind farms, which are linked to small emissions. They are more difficult to place because the investor does not want to have a large share of a single emission, because the segment itself is not very well known and has more risks than other areas, such as transmission,” he explained.

From this came the idea of turning debt papers into an internationally certified green bond and create a fund to promote it. On the one hand, the bank started looking for a partner to work together in the fund, which resulted in the choice for Vinci Partners.

A talk has started with companies to show the benefits of an emissions certification. The initiative is made in a partnership with the Climate Bonds Initiative, which issues the stamps. “The fund is simple, BNDES will hold up to a 50% stake and the rest will be raised by Vinci with institutional investors. The first benefit is to access a broader investor base. The greater competition is to buy the papers,” says Marcello Almeida, a Da Vinci partner.

Along these lines, CPFL Renováveis obtained the international certification of a debenture issue in the amount of $200 million that was already on the market. It is the first debenture to obtain the international seal.

Until then, only bonds issued by companies abroad have obtained the seal, as is the case of BRF and Suzano. The funds raised by CPFL will be used to build the Campos dos Ventos and São Benedito wind projects in Rio Grande do Norte.

This debenture, however, cannot be purchased by the BNDES fund because it is not an infrastructure project, taking into consideration the 12.431 law. Linda Murasawa, executive superintendent for sustainable development at Santander, confirms that there is no yield difference in the international market, but another important benefit is the agility in the placement of the papers given the larger pocket of money.

“Green bonds have been more efficient with the sale done in hours,” he said. She explains that the main reason is the shortage of sustainable projects. Given the size of the global fixed income industry, the industry is still small, but that is what attracts the attention of the growth rate.

The global market surpassed $200 billion in inventory in the first quarter of this year, as a result of the $92 billion issued last year and the $19 billion sold only in the months of January and February this year, according to Bank of America Merrill Lynch (BofA).

Since January 2016, eight countries and about 150 new issuers have entered the market. China offered $30 billion in 2016 and assumed the position of largest issuer.

The US bank plans to issue $90 billion to $30 billion in 2017 in the base scenario, and could reach up to $150 in the most optimistic case.

BNP Paribas is preparing to launch its first fund dedicated to this instrument in Europe in July, having already raised €120 million, but without limit to the resources ceiling. Investors are looking for a yield, explains Felipe Gordillo, BNP’s sustainable investment executives, but only with this instrument is there a transition path to a low-carbon economy.

“In France, as a result of the energy transition law, professional investors need to inform how companies are incorporating clean energy into their investments and how they support the issue of climate change. One way to prove this, is to show that they are buying quotas from a dedicated fund,” says Gordillo of BNP. So far, the experts do not see much of Donald Trump’s government impact on this market, since most of these emissions have not left the United States.



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