50042 - Natura Bond

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Summary of Investment Information

Project Number

50042

Company Name

NATURA COSMETICOS SA

Date SPI Disclosed

Jul 15, 2024

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

Jul 1, 2024

Environmental Category

B - Limited

Status

Active

Last Updated Date

Jul 31, 2024

Department

Regional Industry MAS LAC & EUR

Industry

Manufacturing

Previous Events

Approved : Jul 1, 2024
Signed : Jul 1, 2024
Invested : Jul 5, 2024

Sector

All Other Chemical Product

Project Description

The investment involves the purchase by IFC, for its own account, of unsecured debt instruments, in a principal amount of BRL300,000,000 with an up to 5 years tenor and bullet principal payment at maturity, issued in the Brazilian capital markets by Natura Cosméticos S.A. (Natura or the Company) (the Project). These debentures will be labelled as sustainability-linked debentures (in accordance with the Sustainability-Linked Bond Principles of 2023, issued by the International Capital Market Association – ICMA) with Natura committing to increase its sourcing from the Amazon to 49 new bioingredients by 2027, up from 44 ingredients as of 2023.

Associated Advisory Engagement

In May 2024, IFC has signed a Joint Development Agreement with Natura and VERT (a Brazilian securitization company) to structure a capital markets vehicle that will increase access to finance, foster sustainable supply chains, increase efficiency, and promote on-site capacity development to Natura’s suppliers, mostly small cooperatives, and associations in the Amazon. The Project complements this existing engagement of IFC in Natura’s work in the Amazon.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	68.16
Equity

Development Impact

Assessment of Project Outcomes - Supplier Effects. The Project is expected to stimulate the local supply chain through the development of novel Amazonian ingredients leveraging biodiversity and by scaling up procurement from the Amazonian bioeconomy. The Amazon rainforest constitutes a vital component of the Earth's natural infrastructure and plays a critical role in regulating the planet's climate system and biodiversity. Despite its ecological significance, Amazon rainforest has witnessed a rise in deforestation rates since 2012, with soybean production and cattle ranching identified as key contributors. Over the past two decades, Natura has cultivated a sustainable value chain within the Amazon biome through collaboration with small-scale agroextractivist communities. The Company sources nearly half of its raw materials from Amazonian suppliers, solidifying its model as a globally recognized example of economic use of the standing forest. Assessment of Contribution to Market Creation - Inclusiveness. At the market level, IFC expects that the Project will incentivize other companies to adopt sustainable sourcing practices from Amazon. This has the potential to unlock economic opportunities for marginalized populations within the region. Collaborating with small-scale agroextractivist communities can improve the livelihoods of these underserved groups, while simultaneously promoting sustainable practices that contribute to the well-being of the Amazon ecosystem.

IFC’s additionality in this Project will be both financial and non-financial. Financial additionality is provided in the form of (i) resource mobilization, derived from mobilization of additional funding to support investments in the Amazon, attracting other professional investors through IFC’s role as an anchor investor, and (ii) an innovative financing instrument in the form of a sustainability-linked bond with sustainability performance targets linked to sourcing from the Amazon. Non-financial additionality will be provided in the form of (i) standard setting by providing guidance to Natura to adhere to best international environmental, health, and safety practices, and (ii) knowledge sharing and capacity building through an existing upstream engagement to support Natura’s suppliers.

E&S Category Rationale / Risks and Mitigation

This is a Category B project according to IFC’s 2012 Policy on Environmental and Social Sustainability due to limited and site-specific E&S risks and impacts associated with the proposed expansion within Natura’s Cajamar facility that are avoided or mitigated by adhering to recognized Good International Industry Practices (GIIP) while raw materials sourcing is mitigated by Natura’s supply chain procurement policies that require credible independent certification of all high-risk agricultural inputs by 2025 and all agricultural inputs by 2030 and prohibit natural habitat conversion (per PS6) and include labor protections (per PS2). Key E&S risks and issues associated with this project include: (i) traceability and implementation effectiveness of the E&S

requirements underlying Natura’s supply chain procurement policies, including certification of high-risk commodities; (ii) labor / OHS issues regarding workers in the production lines and logistics; (iii) resource efficiency and pollution prevention/control, including point source air emissions, ambient air quality, odor, noise, wastewater, and solid/hazardous waste management; (iv) community health and safety, including road safety risks due to transport of workers and manufactured products; (v) stakeholders’ engagement, including community grievance mechanism and gender-based violence (GBV) sensitive grievances and referrals.

Contacts

For Inquiries About the Project, Contact

Natura Cosmeticos SA
Nereu Daltin Neto
Director of Treasury
+55 11 97032 7221
nereu.daltin@natura.net
Avenida Alexandre Colares, 1188, Predio 1 - Parque Anhanguera, Sao Paulo - SP, Brazil, 05.106-000
Websitehttps://ri.naturaeco.com/

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Brazil.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. Its purpose is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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