Commodities and net zero drive ESG financing in Latin America
Latin America’s corporates are embracing sustainable local debt financing with enthusiasm. The region’s bankers are betting that it’s going to be as good for bookrunner fees as it promises to be for the environment.
When Caramuru, a large Brazilian commodities trader that specialises in soy and other agricultural commodities, began to assess its options for debt-raising tools last year, it decided to consider green bonds.
To qualify for such a deal, the company ran through more than 5,000 suppliers to document that none of its supply chain was part of deforestation or included modern slavery labour anywhere within its businesses. And this was for a structure that offered opaque cost benefits at best.
“Frankly, the ‘greenium’ [lower financing cost attributed to sustainable bonds] on local debt products that are structured for domestic transactions is not statistically relevant – which is a nice way of saying we don’t see a greenium in Brazil at this stage,” says Frederic de Mariz, head of fintech and ESG (environmental, social and governance) at UBS BB, which worked on the subsequent R$355 million ($72 million) green debenture for Caramuru.