The Social Bond is a financial instrument with the purpose of providing funding for sustainable economic activities, with the objective of generating a positive social impact.
The IDB, Inter-American Development Bank, is an international organization that promotes the economic development of its developing member countries in the region by promoting the establishment, expansion, and modernization of private initiatives in a sustainable way. The IDB Invest supports the private sector and state-owned enterprises by providing its clients with loans, equity investments, guarantees, and advisory and training services.
In September 2020, Banco ABC Brasil was selected by IDB Invest, a member of the IDB Group, to issue the first social bond issued by a Brazilian bank in the country. The transaction is comprised of R$525 million in Financial Letters (“Letras Financeiras”), with a final term of 5 years. With this transaction, Banco ABC and IDB Invest widen their credit offering, targeting four groups of clients: SMEs located in the North, Northeast, and Center-West regions of Brazil; SMEs from any region of Brazil that obtained financing during the COVID-19 crisis; SMEs from any region of Brazil that received financing to support an expansion plan; and Healthcare organizations of any size.
In addition to contributing to the development of the Brazilian capital markets, and for the sustainable finance segment, this transaction was the first social local bond issued by a nongovernment-controlled financial institution in the Brazilian market, and the first thematic bond acquired by IDB Invest in the Brazilian market.
This transaction aimed at contributing to two United Nations Sustainable Development Goals (SDGs): Health and well-being (SDG 3) and Decent work and economic growth (SDG 8). It has also counted with Vigeo Eiris’ Second Party Opinion on the issued social bond Framework, which confirmed that it is aligned with the four core components of the Social Bond Principles 2020 (“SBP”).
Click here to view the Vigeo Eiris’ Second Party Opinion.
Social Bond Framework
In 2020, in partnership with IDB Invest and the Second Party Opinion of Vigeo Eires, Banco ABC Brasil developed ABC Brazil’s Social Framework. The main objective of the Social Framework is to support the development of medium-sized companies – SDG 8, and the healthcare sector – SDG 3.
The Social Framework is aligned with Banco ABC Brasil’s institutional strategy, the Sustainable Development Goals (SDGs), and the Social Bond Principles (SBP) and its four core components: use of proceeds; process for project evaluation and selection; management of proceeds; and reporting.
The proceeds raised through the Social Framework shall be applied exclusively to provide financing or refinancing to clients in the mid-size segment and financing to companies in the healthcare sector, according to the eligibility criteria:
- Total annual revenue between R$30 million and R$250 million located in the North, Northeast, or Center-West Regions
- Total annual revenue between R$30 million and R$250 million in financial difficulties due to the COVID-19 Crisis (i.e. approval and refinancing lines approved for medium-sized companies in the special commission created to address the COVID-19 crisis)
- Total annual revenues between R$30 million and R$250 million with expansion plans.
- Companies in the healthcare sector (i.e. Medicine Distributors; Hospitals and Clinics or Pharmaceutical Industry) that receive a loan from Banco ABC Brasil (i.e. local and international loans, working capital, import financing, pre-export financing, among others).