44866 - ABC Climate II

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Summary of Investment Information

Project Number

44866

Company Name

BANCO ABC BRASIL SA

Date SPI Disclosed

Nov 24, 2021

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

Jan 13, 2022

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Feb 15, 2024

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Jan 27, 2022
Signed : Mar 30, 2022
Invested : May 31, 2022

Sector

Commercial Banking - General

Project Description

The indicative proposed investment consists of a 5-year loan of up to US$100 million to Banco ABC Brasil S.A. (“ABC” or the “Bank”), an existing IFC client since 2009. The proposed investment aims to continue supporting the Bank’s lending to climate-smart sub-projects, with a focus on (i) climate-smart agriculture projects if the sugarcane, coffee and orange crops are granted with an eligible certification (RenovaBio, Bonsucro. Rainforest Alliance and RSB); and (ii) renewable energy projects for the energy generation and transmission associated to sugarcane biomass projects (the “Project”). This Project is part of IFC’s strategy of fostering the greening of the banking sector in Brazil.

Associated Advisory Engagement

IFC is working with the Bank on an Advisory Service, which includes: (i) diagnostics, portfolio baselining and identification of business opportunities; (ii) review of eligible certification for climate-related transactions as well as support in understanding and implementing good practices for data collection and impact reporting; and (iii) employee training on the awareness and knowledge of climate-related business development.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Climate (not covered in any category)

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

IFC expects that this Project will increase access to climate finance in Brazil, particularly in (i) the renewable energy segment by supporting the generation, transmission and distribution associated to sugarcane biomass projects and (ii) climate smart agriculture segment with eligible loans that are accepted if the sugarcane, coffee and orange crops are granted with an eligible certification.

- Financing structure: IFC will invest up to US$100 million in a 5-year A Loan for IFC's own account, providing the Bank with longer funding not readily available in the market given the current economic environment. - Knowledge, Innovation and Capacity Building: IFC will provide ABC with Advisory Services support to reinforce its climate-related business line primarily dedicated to financing eligible sub-projects. - Standard Setting: IFC will support ABC by improving its capacity on E&S risk management through the implementation of enhanced E&S Management System ("ESMS") procedures.

E&S Category Rationale / Risks and Mitigation

The Project will support Banco ABC Brasil climate-smart agriculture financing focused in the sugarcane, coffee and orange crop production as well as renewable energy associated to sugar and ethanol production and bagasse biomass energy co-generation in Brazil. The Project will not support coal-related activities, or higher risk business activities that may include: a) involuntary resettlement, b) risk of adverse impacts on indigenous peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or d) significant occupational health and safety risks. The E&S risks are expected to be of a medium risk nature. Therefore, the Project has been classified as Category FI-2 according to the IFC's Sustainability Framework. Applicable E&S requirements for this Project will be the IFC Exclusion List, relevant national E&S laws and regulations and the IFC’s Performance Standards (as applicable).

The key E&S risks related to the Project derive from the Bank’s capacity to identify and manage E&S risks of the targeted portfolio, which are expected to be of a medium nature and associated with labor and occupational health and safety (OHS), pollution prevention and community impacts. Main risks are related to labor conditions, including supply chain and contractors, as well as impacts on natural resources from agricultural practices. As part of the Project, the Bank will be required to: (1) enhance its Environmental and Social Management System (ESMS) procedures to apply the Exclusion List, local E&S regulations and IFC’s Performance Standards to the sub-projects supported under the asset class; (2) nominate an E&S officer; (3) provide training; (4) remain committed to apply labor standards established by the IFC Performance Standard 2; (5) apply to sub-projects IFC’s disclosure commitments, and (6) submit a periodic report to IFC. E&S Risk Management System Banco ABC Brasil has an ESMS in place, with procedures overall performed in a five step routine: (i) review through web-based service providers that screens sub-projects for money laundry and E&S related themes; (ii) E&S risk categorization;(iii) for project finance and higher risk projects, a self-declaratory IFC Performance Standards based questionnaire is applied; (iv) findings are included in documentation submitted to investment committee for credit approval; and (v) E&S clauses included in legal documentation encompass monitoring and reporting requirements. The Bank has a full-time dedicated team including one E&S officer, two analysts and one intern. Banco ABC counts with an External Communication Mechanism (ECM) being able to receive and respond to third party concerns through website channels and corporate phones. As part of the ESMS enhancement, ABC will develop sector-specific questionnaires and implement monitoring procedures to assess sub-projects E&S action plans implementation. ABC will also review sub-projects External Communication and Grievance Mechanisms.

S.no	Title	Anticipated Completion Date	Status
1	Other1 - Nominate E&S officer	02/15/2022	Completed
2	Other2 - ESMS enhancement	02/15/2022	Completed
3	Other3 - Implement staff training	05/16/2022	Completed

Contacts

For Inquiries About the Project, Contact

Banco ABC Brasil S.A.
Patricia Ackermann
Financial Institutions Relationship Manager
+55 (11) 99983-2676
patricia.ackermann@abcbrasil.com.br
São Paulo, SP Brasil
https://www.abcbrasil.com.br/

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