The private investment arm of the Inter-American Development Bank’s parent group and Banco de Bogota in Colombia jointly announced the issuance of a sustainability bond worth USD230m to fund social and climate projects, as reported by Reuters on March 17. The bonds, with a term of up to 10 years, will be issued on the international market by Banco de Bogota. IDB Invest’s Chief Investment Officer, Gema Sacristan, said the bond issuance will serve as an example for the development of the capital market for this type of instrument in Latin America and the Caribbean. The funds generated by the bond will finance micro, small and medium-sized enterprises led and owned by women, low-income and priority housing, green buildings, renewable energy, energy efficiency projects, circular economy, and sustainable agriculture. IDB Invest will subscribe for USD80m, IFC for USD75m, FinDev Canada for USD50m, and USD25m from a pair of funds managed by Finance in Motion (FiM).

Sustainability bonds are bonds that raise funds to finance or refinance a mix of environmentally-friendly and socially beneficial projects or activities. They can be issued by corporations, governments, municipalities, and for specific assets or projects. Such bonds should comply with the Sustainability Bond Guidelinesg from International Capital Market Association (ICMA), which align with both the Green Bond Principles (GBP) and Social Bond Principles (SBP). These bonds can either be unsecured, relying on the creditworthiness of the issuer, or secured by collateral on a specific asset.

Sources: 

https://www.reuters.com/markets/rates-bonds/idb-invest-banco-de-bogota-announce-230-mln-sustainability-bond-2023-03-17/

https://www.pimco.com/en-us/resources/education/understanding-green-social-and-sustainability-bonds/