Year: 2021
Winner: Itaú Unibanco $500 million 2031 Sustainability Tier 2 Notes
The winner of the award for Financial Institutions Deal of the Year is a bond that managed to boost the capital adequacy of the issuer while enhancing its reputation for sustainability.
Markets reacted positively last January when Itaú Unibanco launched its $500 million, 10-year sustainability Tier 2 subordinated bonds, paying a 3.95% rate in a deal that was 2.5 times oversubscribed. It was the first sustainable Tier 2 bond issued by a Latin American bank.
“It was an emblematic deal which has the goal of providing funding for sustainable projects according to our ESG framework,” says Daniel Goretti, Head of Treasury at Itaú Unibanco.
The proceeds will be used to fulfill some of the bank’s commitments to originate the equivalent of R$400 billion in operations that have social impact, and to help develop a more inclusive and sustainable economy, the bank says.
The allocation includes funding for renewable energy projects and for SMEs owned by women or based in poor areas in the north and northeast of Brazil. Those goals helped to bring ESG-focused investors on board. Itaú Unibanco estimates that they amounted to 25% of all buyers.
“The sustainable feature brought an important degree of diversification to our investors’ base,” Goretti says.
The note achieved the lowest coupon ever paid by a Brazilian bank for a Tier 2 bond, according to Goldman Sachs. Its success raises the possibility that Itaú Unibanco will seek to do similar transaction in the future, as the bank strives to raise funding in the capital markets in line with its ESG pledges, including becoming carbon neutral by 2050.
“Our ESG framework provides us with a well-designed structure that is audited and has a commitment to reporting how we use the raised money. It helps us to be ready to make similar issuances at any moment,” Goretti says. – LF