First impact fund dedicated to promoting green bonds in Latin America with LAIF support launched at the COP26 in Glasgow
LAGreen is an innovative public-private partnership fund, initiated by KfW with seed investments from BMZ and the EU to foster the issuance of green bonds in Latin America with the ultimate aim to protect climate and biodiversity. It will particularly support first time issuers and those issuers with a high ambition towards transparency and environmental quality of underlying assets. Through leverage and revolving use of the investors’ contributions, LAGREEN will encourage, wherever local currency risk hedges and/or diversification are possible, primary issuances in local currencies among the relevant target countries. It will carry out anchor investments which will encourage local and international institutional investors to follow suit into a Green Bond investment, thereby mobilizing additional private funding for NDC implementation and helping spur local capital markets in LAC.
The fund was officially launched during the COP26 in Glasgow, at an event hosted by the German Pavilion, with the presence of speakers from the European Union, the Federal Ministry for Economic Cooperation and Development, and the Climate Bonds Initiative (CBI), as well as Finance in Motion and the fund itself.
The panelists welcomed the creation of LAGreen as an instrument to boost access to finance for projects that contribute to the fight against climate change.
Stefano Signore, Head of Unit, INTPA expressed the importance of sustainable finance for the European Union mentioning the new EFSD+ and the comprehensive sustainable finance ecosystem already developed: “LAGreen is not an isolated project: our vision for the future includes more cooperation with the private sector and more efforts towards sustainable finance and channelling funds towards the transition to a climate-neutral economy”
Johannes Scholl, Chairman of the Board of Directors of LAGreen, commented: “Latin America will be at the forefront of the fight against climate change. The region hosts some of the largest forest areas and is among the richest regions in the planet in terms of biodiversity. Mobilizing investments to promote the transition towards sustainable economic models will be essential to protect this wealth and generate global environmental benefits.”
Elvira Lefting, Managing Director at Finance in Motion, said: “Green bonds are an important tool for investors to identify sustainable projects that can be supported with their investments. But especially in Latin America, the market is still quite new: Investors are keen to buy green bonds, yet their availability is limited, and many local issuers still face difficulties accessing this market. That’s where LAGreen comes in. We believe that last year has shown that if we can fight a pandemic, we can also fight climate change; and as industries pivot to meet the challenges of a changing environment, we want to help pave the way toward a green economy and channel investments toward a sustainable future.”
Jose Mazoy, Global CIO of Santander Asset Management added “It is an honour to participate in this project where we can contribute with two very relevant traits of our DNA as investors: our commitment to sustainability and our long history of involvement with Latin America. This fund will open the doors of green financing to smaller players which will help the region catch up on climate change mitigation and adaptation”
LAGreen is structured as a blended finance fund, aiming to leverage public contributions to mobilize financing from the private sector and has received a LAIF contribution of €13 million in junior shares as a first-loss cushion, plus €2 million for technical assistance to bonds issuers and to expand the market. BMZ, the founding donor, has put in €73.5 million. Other public and private investors are expected to join soon. All in all, about €450 million will be invested in green bonds.