In 2022, BTG Pactual coordinated the structuring of the first blue bond in Brazil on behalf of Brazilian water company BRK Ambiental.
The BRL1.95 billion ($364 million) bond issuance is also the first 'blue' one by a private issuer in Latin America and the first one globally in the water supply and sanitation sector to access capital markets, according to lead bookrunner BTG Pactual.
The initiative was praised by judges for "an innovative use-of-proceeds blue bond paving the way for corporate issuance in emerging markets in a critical sector with significant environmental and social benefits".
The use of proceeds will be directed towards business solutions for oceanic health, freshwater and to improve access to water and sanitation.
Approximately half of the Brazilian population still lacks access to sanitation services and this is a sector with a high need for infrastructure investment and a high potential to generate benefits on social and environmental issues, such as improving public health and preserving water resources.
On a broader scale, investments in sanitation can generate direct, indirect, and induced economic impacts at the national level and local level.
Correct treatment of effluent prevents contamination of water bodies and soil, and promotes the conservation of biodiversity through the improvement of water quality.
It is hoped these investments will promote basic infrastructure for the population living in poverty and decrease vulnerability to health risks, BTG Pactual said. The use of proceeds are expected to provide 90% of the population in the region of Maceió in the state of Alagoas in Brazil with sanitation services until 2037 and reduce water waste to up to 25% over 20 years, impacting 1.5 million people.
BRK's blue bond was judged by Sustainalytics to be aligned with ICMA's Green Bond Principles and Social Bond Principles and follows the IFC Guidelines for Blue Finance. The funds were used to refinance a grant payment of a 35-year concession in Alagoas State, the first public bidding after the introduction of Brazil's New Sanitation Legal Framework.
"Considering all the investment needed in the water supply and sanitation sector, we believe that private capital is essential to provide access to basic infrastructure to the target population, with a strong positive social impact," commented Patrícia Genelhú, head of sustainable and impact investing at BTG Pactual.
"At BTG Pactual, we have carried out consistent and pioneering activities in the capital market within the ESG scope, coordinating several green-labelled transactions and others related to sustainable finance. We are proud to take another step in this agenda, and to be the first lead coordinator bank of a blue bond transaction for the private sector in Brazil, stimulating the maturation of the domestic market by arousing investors' curiosity and appetite for allocations and transactions like this one," added Genelhú.
"This issuance is the result of the sanitation market's maturation in the last two years, which has provided greater legal certainty to operators, such as BRK, who are committed to universalising services in Brazil," said BRK Ambiental CFO, Felipe Cunha.
