- With this transaction, Bancolombia moves forward with its aspirations to decarbonize its portfolio and foster financial inclusion.
Medellin and Luxembourg, 26 October 2022 – LAGreen, the Latin American Green Bond Fund, has partnered with IDB Group in a landmark COP 640 billion (ca. USD 150 million) sustainability-linked bond (SLB) issued by Bancolombia.
Bancolombia is the largest bank in Colombia and a regional sustainability champion (awarded twice as the world’s most sustainable bank by the Dow Jones sustainability Index). This groundbreaking bond was developed jointly with LAGreen and IDB-Invest and is structured as a sustainability-linked bond (or SLB), combining an environmental and a social objective: Reducing the carbon intensity of the bank’s portfolio by over 35% and providing financing to over 1.5 million low-income people with limited access to finance within five years. The proceeds of the bond will be dedicated to the bank’s portfolio of Business with Purpose, consisting of investments with a social and/or environmental impact.
Carbon intensity is measured as the estimated volume of CO2 emissions generated by the bank’s portfolio in a given year, compared to the lender’s volume of activity (ton CO2e / COP million portfolio). Through this performance indicator, Bancolombia, advances towards its commitment as a member of the global Net Zero Banking Alliance.
The goals are considered ambitious compared to both peers in the sector and international standards according to Sustainalytics, who conducted an independent external review of the Framework. An external auditor will monitor and certify the banks progress towards accomplishing these goals on an annual basis which – in case of being missed – result in a rate increase for the bond.
LAGreen actively participated in structuring the bond, in partnership with IDB-Invest, with the aim of developing a novel instrument that is both impactful, commercially viable, and replicable. Furthermore, LAGreen plans to provide additional technical support to assist the further development of the bank’s circular economy strategy, a key component of the transition towards sustainable economic models, which is still typically underserved by the financial sector.
LAGreen Chairperson Johannes Scholl said: “This bond demonstrates the capacity of Latin American financial institutions to be forerunners at the global level in the development of innovative impact investment solutions. Our objective is to act as an agent of change in the region. Therefore, LAGreen is very proud to have been part of this partnership with Bancolombia and IDB Invest.”
“At Bancolombia we are committed to mobilizing resources towards activities that incorporate ESG criteria. Working with organizations such as IDB Invest is essential to design innovative solutions that contribute to our purpose, which is to generate well-being for people based on sustainable development. We have important objectives in financial inclusion and decarbonization of the portfolio, and we want to continue generating a positive impact on social and environmental issues,” says President of Bancolombia Juan Carlos Mora.
“This deal reinforces our commitment to support the private sector and, on this occasion, the financial sector, in developing innovative solutions that we hope will motivate others to follow the same path. These initiatives have a direct impact on issues as sensitive as financial inclusion and the transition to an economy with less environmental impact and more conscious of the real challenges faced by our region in terms of decarbonization,” says IDB Invest’s CEO James P. Scriven.
LAGreen is the first green bond fund dedicated to Latin America.
By investing in green bonds and supporting new issuers with technical assistance, LAGreen’s goal is to boost environmental and social benefits across the region and promote the transition to a green economy. In addition, the fund aims to promote high impact standards for green bonds, both in terms of the impact of supported projects, as well as green credentials, reporting, and impact assessment.
As an impact investment fund advised by Finance in Motion, LAGreen was established as an initiative of Germany’s KfW Development Bank, with seed capital provided by the European Union (EU) and the German Federal Ministry for Economic Cooperation and Development (BMZ).
Grupo Bancolombia is a financial group with a presence in Colombia and Central America, and it offers its portfolio of financial products and services to more than 14 million active clients. It provides commercial and consumer banking services, stock brokerage, investment banking, financial leasing, factoring, fiduciary services, asset management and private banking, among others.
About IDB Invest
IDB Invest is a multilateral development bank committed to promoting the economic development of its member countries in Latin America and the Caribbean through the private sector. IDB Invest finances sustainable companies and projects to achieve financial results and maximize economic, social, and environmental development in the region. With a portfolio of $14.8 billion in asset management and 376 clients in 25 countries, IDB Invest provides innovative financial solutions and advisory services that meet the needs of its clients in a variety of industries.
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