48043 - DCM Sol Agora FIDC

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Summary of Investment Information

Project Number

48043

Company Name

SOL AGORA GREEN ESG FUNDO DE INVESTIMENTO EM DIREITOS CREDITORIOS

Date SPI Disclosed

Apr 3, 2024

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

May 3, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Dec 7, 2024

Department

Regional Industry FIG LAC & EUR

Industry

Infrastructure

Previous Events

Approved : Aug 7, 2024
Signed : Nov 18, 2024
Invested : Nov 29, 2024

Sector

Renewable through Financial Intermediaries - Renewable Energy Generation

Project Description

The proposed project (the “Project”) consists of a 9-year (including 1 year of grace period) investment of up to BRL 250 million investment in one or more series of senior quotas of Sol Agora Green II ESG FIDC (“Sol Agora FIDC” or the “Fund”), which is a non-recourse vehicle that provides long-term financing to diversified residential clients and small and medium enterprises (“SMEs”) for the acquisition and installation of micro and mini-distributed solar power generation assets in Brazil.

Associated Advisory Engagement

IFC expects to provide technical support to ensure that the Company’s growth is framed in solid processes and adequate capacity to manage E&S risks in accordance with IFC Performance Standards (PS). And in addition to the E&S standards. IFC is planning to accompany Sol Agora regarding matters related to credit risk management, underwriting, product development, market expansion, operations, and digitalization.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
Equity

Development Impact

IFC anticipates that the Project will promote increased access to climate finance to retail customers and SMEs in Brazil, promoting the replacement of costly energy sources with lower-cost, solar-generated electricity. The attractive spread between the average electricity tariff and the levelized cost of electricity for solar will imply immediate cost savings upon installation of the solar panel. Through IFC investment, Sol Agora is expected to support an expansion of around 90MW, thus contributing to the improvement of the carbon footprint of the power sector in Brazil. The Government of Brazil has committed to reducing the country’s GHG emissions by 50% compared to 2005 levels in 2030 under the Nationally Determined Contribution (NDC) submitted as part of the Paris Agreement. The Project will contribute to the country’s climate mitigation agenda by supporting, with a small footprint but directly, the displacement, particularly during draught events, of high-polluting thermal power sources such as coal and heavy fuel oil, with non-conventional renewable energy, hence reducing the associated carbon emissions. IFC anticipates that the Project will help deepen the Brazilian FIDC market by supporting the nascent ESG-oriented FIDC sub-sector. Sol Agora FIDC is aligned with the Green Bond Principles and has received an SPO (Securitização de Performance Operacional Sustentável) from Bureau Veritas as a pure-play ESG vehicle. Only a few Green FIDCs are in operation in Brazil so far.

IFC will be providing a 9-year financing structured through a FIDC that is not commonly available in the market for this asset class. Most financiers remain reluctant to increase exposure to long term infrastructure assets in emerging segments such as distributed generation, especially when the target market is SMEs and residential consumption. IFC’s demonstration effect/anchor investor role will provide comfort to future potential investors and help the Company to raise funding necessary to meet its business plan.

E&S Category Rationale / Risks and Mitigation

The Project consists of an up to BRL 250 million investment in a structured credit opportunity fund(s) that acquire credits originated by Sol Agora, focused on long-term financing to diversified residential clients and SMEs for the acquisition and installation of micro and mini-distributed solar power generation assets in Brazil. The potential E&S risks and impacts associated with the Project are likely to be of medium to low nature. High E&S risk sub-projects will not be eligible; therefore, this transaction was categorized as FI-2 according to IFC’s Sustainability Framework. IFC’s applicable E&S requirements for this project will be IFC Exclusion, national laws, and supply chain E&S risk screening as applicable.

The main E&S risks and impacts of the project are associated to the FIDC’s portfolio and pipeline focused on small photovoltaic projects. Targeted investments are divided in two main segments which are 80% residential and 20% SMEs. As part of the Project, Sol Agora will be required to (i) implement an ESMS to screen out higher E&S risk transactions and to assess its SMEs/rooftop and GD/solar energy plants against the IFC Exclusion list and national laws, (ii) include a supply chain mapping approach within its ESMS as a screening tool to onboard distributors onto its platform, (iii) nominate an ESMS Officer, (iv) implement staff training; and (v) submit the onboarding reports of the first 5 distributors for IFC review and a periodic report, detailing the implementation of it ESMS.

Title	Anticipated Completion Date
Nominate an ESMS Officer	06/14/2024
Implement an ESMS	06/29/2024
Staff training	12/12/2024

Contacts

For Inquiries About the Project, Contact

Descarbonize Soluções S.A
Eduardo Solamone
Head of Capital Markets
+5511 97024-1234
eduardo.solamone@solagora.com.br
Av. Nações Unidas, 14261 cj 105 - Vila Gertudres São Paulo
https://solagora.com.br/

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