RIO DE JANEIRO – Albion Capital and Órigo Energia announced the close of Green FIDC Solar GD, the first FIDC issued as a climate bond in Brazil, at USD 35.8 million (BRL 201.5 million). The announcement comes two weeks after the close of Brazil’s first Green CRI, a spinoff from the Green FIDC, which secured USD 14.3 million (BRL 80.1 million). Together, the two vehicles developed by Albion Capital to finance Órigo’s expansion in solar distributed generation raised USD 50 million (BRL 281.6 million).
The Green FIDC Solar GD and the Green CRI Órigo are each the first of their kind of security to be certified climate bonds for the Brazilian market. Certification is handled by the rigorous global standards of the Climate Bonds Initiative.
The Green FIDC is an internationally awarded project finance concept created by Albion Capital to allow clean energy and energy efficiency projects to secure financing based on future cash flows from energy sales. The Green FIDC builds on a Brazil-specific instrument, the Fundo de Investimento em Direitos Creditórios (FIDC), which is used by companies to raise capital by securitizing receivables.
Renewable energy and energy efficiency projects are a crucial component of Brazil’s 2030 climate goals. The country aims to increase energy efficiency by 10% and for non-hydro renewables to account for 23% of total power generation.
“As real interest rates have been decreasing substantially, Brazilian investors are looking for alternatives to increase yields. Sustainable infrastructure projects are particularly well-positioned – due to the relative predictability of their cash flows and inflation-linked prices – to provide an attractive alternative to traditional low-yield fixed income products,” said Paulo Todaro, Founding partner and CEO of Albion Capital.
Based on the Green FIDC model, the Green CRI (Certificado de Recebíveis Imobiliários) is a Brazilian form of mortgage-backed security (MBS) designed for real estate investors.
“While developing the Green FIDC, we noticed a demand for other alternative investment vehicles that apply the same securitization solution and allow investors to tap the sustainable infrastructure market. That led to the development of a sidecar, replicating the same structure into an MBS issue (Green CRI),” added Todaro.
“Órigo Energia has been committed to sustainability for 10 years – and we believe that the way we deal with capital markets to fund our expansion must also reflect this commitment”, said Rogério Marchini Santos, CFO at Órigo Energia.
The Green FIDC concept was initially proposed and developed as part of the Global Innovation Lab for Climate Finance (the Lab). The Lab is an investor-led initiative that identifies and develops solutions to drive critical public and private investment to action on climate change in developing economies. Since 2014, the Lab has launched 49 finance instruments that have mobilized USD 2.4 billion for climate projects in emerging markets.
“The Green FIDC offers an important way to channel private capital to emerging green sectors in Brazil, through the established Brazilian FIDC mechanism. Leveraging capital markets to channel private investment is key to take advantage of the huge opportunity Brazil has for developing sustainable energy infrastructure,” said Dr. Barbara Buchner, Global Managing Director of Climate Policy Initiative, which serves as Secretariat of the Lab.
In 2019, Convergence awarded a design funding grant to Albion Capital to further develop the Green FIDC concept. The grant was used to support the research, structuring, and development activities required to bring the Green FIDC model to Brazilian capital markets.
“What attracted us to this concept was how Albion Capital adopted an instrument already familiar to Brazilian investors, the FIDC, and applied it to green project finance for the first time,” says Joan Larrea, CEO of Convergence. “Making it possible, through blended finance, to attract local institutional investors in Brazil — not only a large financial market but also a critical country to our global climate goals– into climate-related projects.”
Justine Leigh-Bell, Deputy CEO of Climate Bonds Initiative, noted: “the issuance of Albion Capital’s Green FIDC represents another relevant milestone in the expansion of the green finance market in Brazil. We do recognize the country’s potential for renewable energy generation, and investors are hungry for new opportunities like this. Congratulations to Albion Capital for this historic issuance of the first FIDC certified by the Climate Bonds Standard.”
For next steps, Albion Capital is currently investigating an expansion of other variations of the Green FIDC concept into different vehicles that match investors’ risk-return preferences. The goal is to allow a faster and simpler scale-up process for the solar market as well as for other sectors, like water infrastructure for example.
Albion Capital is a Brazilian asset management firm – authorized and regulated by the Brazilian Securities and Exchange Commission (CVM) – developing and managing structured investment products to finance companies and projects in the sustainable infrastructure space. Albion specializes in taking a proactive role in the early preparation of investment opportunities and using securitization to generate superior risk-return profiles. Albion Capital focuses on innovative and complex ventures where its investment approach can yield a considerable premium to investors.
Órigo Energia is the leader in shared generation in Brazil is one of the pioneering companies in the country. Operating since 2010 Órigo aims to massify and democratize renewable energy. In 2019 Origo obtained international certificate as a B Company for its commitment towards environmental and social impacts, generated through its business model.
The Global Innovation Lab for Climate Finance identifies, develops, and launches innovative finance instruments that can drive billions in private investment to action on climate change and sustainable development. The Lab is funded by the Bloomberg Philanthropies, the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU), the Netherlands Ministry for Foreign Affairs, The Rockefeller Foundation, The Swedish International Development Cooperation Agency (SIDA), and the UK Department for Business, Energy & Industrial Strategy. Climate Policy Initiative serves as Secretariat
The Climate Bonds Standard and Certification Scheme is a labelling scheme for bonds and loans. Rigorous scientific criteria ensure that bonds and loans with Certification, are consistent with the 2 degrees Celsius warming limit in the Paris Agreement. The Scheme is used globally by bond issuers, governments, investors and the financial markets to prioritise investments which genuinely contribute to addressing climate change.
Rob Kahn, Communications Manager, the Global Innovation Lab for Climate Finance
Climate Policy Initiative
Júlio Lubianco, Communications Associate, the Global Innovation Lab for Climate Finance
Climate Policy Initiative
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