A company that helps to close the gap in access to clean water and sewage treatment within a population is likely to always find plenty of opportunities to raise sustainable funds; the nature of the business just makes such capital a logical option.
But Aegea, Brazil’s largest private sanitation company, has gone a step further, adding a range of ambitious sustainability targets to its financings, and, in doing so, raising the bar for the broader sustainable finance marketplace. Recent bond issuances by the firm, for example, have incorporated KPIs for more efficient energy consumption and lower carbon emissions as well as targets to improve diversity among its top leadership.
“Those targets reflect the company’s vision,” says Fabiana Judas, the director of finance at Aegea, Sustainable Corporate Issuer of the Year.
Recent issuances by the company include two blue debentures linked to R$25 billion project financings structured by national development bank BNDES to fund two water and sewage concessions in Rio de Janeiro, and the re-opening in June of $300 million in hybrid sustainable and sustainability-linked notes in global markets.
The debentures are particularly relevant because Aegea was one of the first private players to issue blue bonds in the Brazilian market. In this case, yields are linked to investments to preserve fresh water and sea water resources. Accounting for both local and international issuances, the company has already placed over R$20 billion in bonds that can boast an ESG label, Judas points out.
“It is a commitment that the group has made and which is part of our DNA,” she says.
Among its notable sustainable transactions was the landmark financing for two water and sanitation concessions in the Brazilian state of Rio de Janeiro, Aguas do Rio Block 1 and 4 – a transaction which included two sustainable and blue debentures totalling almost R$9 billion, as part of the mammoth R$25.5 billion financing package – one of the most significant in recent history not only in Brazil but in Latin America.
Judas says tshe perceives greater than ever demand among international investors for sustainable bonds. More importantly, perhaps, the ESG character of AEGEA’s recent deals has helped broaden the company’s investor base, diversifying its sources of funding. While the local sustainable market is not yet there, says Judas, there is some positive momentum in that direction within Brazil. In any case, investors could do more to motivate issuers to link their placements to ESG goals, she says.
“Of course, we would see in a positive way that investors made a bigger effort to award sustainable issuers with a cost reduction, especially in the local market,” she points out. “But that is not a sine qua non condition for us. We are already issuing sustainable bonds because we are a company with a focus on ESG.”