Year: 2021
Winner: Suzano
Brazilian pulp and paper firm Suzano has been a mainstay of sustainable bond issuance since the mid-2010s. It lived up to its long-standing reputation in 2021 by issuing a couple of bold ESG-themed bonds – and also added a sustainable loan to the mix.
In a sense, it all amounted to business as usual for the company, which wins the award for Sustainable Borrower of the Year.
“When we started issuing green bonds in 2015, there were no visible advantages for doing it,” CFO Marcelo Bacci tells LatinFinance. “But we believed that there was already a trend for investors to look for sustainable investments, and it was important for us to place ourselves as a company that led that segment.”
From green bonds, Suzano evolved its range of ESG-themed securities to sustainability-linked bonds (SLBs) which require firm commitments by the issuer to comply with strict sustainability targets or face higher interest rates.
In June, Suzano issued a $1 billion, 10.5-year bond where it made two pledges. The first was to reduce water withdrawal intensity in industrial operations to 26.1 m³/t of product by 2026, from the 29.8 m³/t level that it registered in 2018. The second was to have 30% of all its leadership positions filled by women by 2025, up from 16% in 2019.
If the company fails to meet one of those targets, 0.125% is added to the 3.125% coupon of the bond. Failing in both amount to 0.250% higher costs. A second SLB bond, a $500 million, 7-years note, was placed in September 2021.
“We have striven to select targets that are relevant, ambitious and measurable,” Bacci says. “It was a successful deal and we plan to keep using sustainability bonds and loans in the future. We are able to place debt with lower costs thanks to this structure, even though it implies some risk of paying more if we do not meet the targets.”
Earlier, in February, Suzano had tested the sustainable loan market by borrowing $1.57 billion in a deal where interest rates were linked to meeting targets in reducing greenhouse gas emissions and industrial water withdrawal. If the company meets them, 0.02% will but cut from the Libor+1.15% rate agreed with the lenders.
The company has no plans to stop raising money via ESG deals, adding new targets in different sustainable areas whenever possible.
“Diversity and inclusion are as important as environmental issues, and we believe it is something that will contribute to our results in the future,” Bacci says. “It is clear that, at each new transaction, there is a growing number of investors interested in ESG securities.” – LF