IDB Invest and Banco de Bogotá announce the upcoming issuance of the first sustainable, subordinated bond issued in the international market by the Colombian bank.
The US$230 million bond will be subscribed by IDB Invest, acting as lead investor, and other multilateral entities and impact funds, to support social and green projects in Colombia.
The signing of the subscription contract with investors was presented at the Annual Meeting of the Boards of Governors of the IDB and IDB Invest in Panama with the participation of Gema Sacristán, IDB Invest chief investment officer, and Gerardo Hernandez Correa, vice-president and general counsel of Banco de Bogotá.
Through this issuance, Banco de Bogotá will finance its social portfolio for micro, small, and medium-sized enterprises (MSMEs), MSMEs led and owned by women, and low-income and priority housing. Regarding the green portfolio, Banco de Bogotá will finance green buildings, renewable energy, energy efficiency projects, circular economy, and sustainable agriculture, among others.
The issuance consists of the subscription of sustainable subordinated bonds in the international market by Banco de Bogotá with a term of up to 10 years. Sustainable subordinated bonds are a type of bond where the bond resources are allocated to specific projects in terms of financing for MSMEs, MSMEs led by women, financing of social housing and climate financing projects. At the same time, the bond is computed within the Tier II capital (Additional Equity), which allows the financial entity to grow in a more orderly manner in these new loans by having this regulatory capital component.
IDB Invest will subscribe US$80 million, while other investors will participate with US$75 million from the International Finance Corporation (IFC), US$50 million from the Canadian Development Institute (FinDev Canada), and $25 million from LAGreen Fund and Eco-business Fund, managed by Finance in Motion (FiM).
As part of the bond issuance process, IDB Invest advised Banco de Bogotá in the design of the methodological framework for the use of funds, which contains the criteria for selecting, monitoring and evaluating projects, aligned with the principles of sustainable bonds of the International Capital Markets Association (ICMA).
IDB Invest’s Gema Sacristán said: “The issuance of this type of bond will serve as a basis and example for the development of the capital market for this type of instrument in Latin America and the Caribbean, necessary for the strengthening heritage of the countries of the region”. She highlighted IDB Invest’s leadership and commitment to developing access to international capital markets for our clients in the region.
“We are very pleased with the work carried out in collaboration with IDB Invest for the issuance of our first sustainable subordinated bond. This achievement reflects our commitment to allocate resources to high-impact projects in mitigation and adaptation to climate change,” said Gerardo Hernandez Correa. “In addition, we are proud to continue promoting business development and job creation, access to affordable housing, women’s empowerment and gender equality, as we have proposed in our sustainability strategy.”
The Use of Funds Framework has been analysed by S&P, the entity that has prepared the second-party opinion that labels the bond as “strong” when it comes to the use of funds, sub-loan selection process and Use of Funds Framework resources. In turn, the bond was labelled as “advanced” in the reporting category.
Additionally, IDB Invest will provide technical advisory services to develop a differentiated value proposition for clients in the women’s SME segment, which will promote Banco de Bogotá’s inclusion and equity strategy.