French development agency AFD has signed a sustainability-linked loan for EUR200 million ($234 million) to spur a reform of the state water and sanitation company of Ceará, a semi-arid state in northern Brazil.
The 15-year ESG loan to Companhia de Água e Esgoto do Ceará (Cagece) will be disbursed in three tranches. A first installment of EUR120 million is due to be released next month, followed by two others in 2026 and 2027, AFD said in a release on Thursday.
The facility charges a fixed rate of 5.28% and a floating rate equivalent to the six-month Euribor plus a 2.43% spread, the agency told LatinFinance via email.
The fixed rate will fall to 5.17% and the spread to 2.33% if the company hits its sustainability targets, which include reducing water loss, expanding coverage, and drawing up a climate plan, among others, it said.
AFD said in the press release that the financing is designed to aid the structural transformation of Cagece, whose “significant challenges” are being made worse by climate change.
Less than half of the state’s population currently have access to wastewater treatment and sanitation services, the agency said.
AFD has issued loans of more than EUR1 billion for water and sanitation investment in Brazil since 2010.
Cagece will also receive a EUR500,000 grant plus technical support, the agency added.