Investor Interest Blossoms in Argentine Green Bonds

The BYMA stock exchange has an index of companies that meet environmental criteria

Foto: Mikael Sjoberg
January 03, 2022 | 09:04 PM

Buenos Aires — The environmental agenda has become a priority in many developed countries and increasingly so among the private sector and, more specifically, investors, as companies begin to incorporate green best practices and make themselves more attractive to investment.

Investor interest in companies with a sustainable profile has provided them with extra motivation to embrace environmental best practices, and Argentine stock exchange Bolsas y Mercados Argentina (BYMA) has published a list with the issuers it highlights as being “leaders in environmental and social issues, as well as corporate governance and sustainable development”.

  • Priority: According to a report by the Inter-American Development Bank (IDB), 79% of companies consider the environment a priority theme, while 22% said they were deeply analyzing their commitment to sustainability.

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  • Why? “The BYMA compiles the list based on various criteria, such as sustainability policies, and seeks to reward companies that show such behavior, highlight them and spread the trend to others,” Ivan Buffone, a partner at consulting firm Business & Sustainability, says. “There is growing interest among private and institutional investors to place their money in projects that they can verify have a positive social and environmental impact”, and that “there is a good space for this option in the traditional stock market in Argentina,” he adds.

At a global, regional and local level, sustainable finances are growing in importance, especially the issuance of green, social and sustainable bonds that this year reached a new record in volume, reflecting investors’ interest in this kind of debt,” according to the BYMA report.

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The Index

Maria Martha Deleonardis, deputy manager for responsible business at BBVA Argentina, one of the companies recognized by the sustainability index, told Bloomberg Línea that making the list “is a strategic priority” because “it contributes to promoting a collective commitment to a greener and more just world”.

Criteria: The index is non-commercial in nature and evaluates the performance of BYMA-listed issuers in the four ESG-D pillars (Environmental, Social, Corporate Governance and Sustainable Development). Eligibility is determined by the most solvent companies, i.e. those that have been part of the Merval Index or the S&P Merval in recent years.

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In addition, Deleonardis said that “companies can play a fundamental role in contributing to the fight against climate change. At BBVA we are catalysts towards creating a sustainable world by mobilizing capital to curb climate change, promoting sustainability with all our stakeholders and integrating sustainability into risk management procedures”.

  • The companies: BBVA, Banco Macro, Central Puerto, Holcim, Pampa Energía, YPF and Transportadora de Gas del Sur are among those on the BYMA sustainability index.

“BBVA was the first institution in Argentina to grant a loan, certified as sustainable under the sustainable transactional banking framework, to the Medicus company, whose funds were used to purchase supplies and equipment to combat COVID-19,” she added.

  • The aim: The index aims to raise awareness among the capital markets regarding the benefits of reporting and being a sustainable company: identifying new business opportunities and improving their ability to attract capital.

The BYMA has said that, “in the coming months, the launch of a Sustainability-Linked Bond Panel is planned, and also to rebalance the Sustainability Index at the beginning of 2022″.

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A Global Level

BYMA’s index has a global benchmark, the Dow Jones Sustainability Index. That index comprises global sustainability leaders identified by S&P Global through the evaluation of corporate sustainability, and represents the top 10% of the 2,500 largest companies in the S&P Global BMI, according to long-term economic, environmental and social criteria.

The sector with the greatest presence in the index is technology (28.7%), followed by health (22%) and finance (11.1%). The country with the most companies included is the United States (50.8%), followed by the United Kingdom (7.3%) and Switzerland (5.5%). From Latin America, Brazil (0.7%), Colombia (0.1%) and Chile (only one company) are included.

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Sustainable Bonds

BYMA also has the SVS Bonds panel, which includes companies whose funds “will be applied exclusively to finance, or refinancing, either in part or in full, new or existing eligible green, social or sustainable projects”.

  • How many were issued? Fourteen bonds were issued in 2021, six social, six green and two sustainable. Among the social bonds is that of the NGO Techo, which made the placement on October 22 and received “an over-subscribed demand, with offers for $40.2 million for an issuance of $18 million”.

The purpose of this placement is “the construction of a new Social Factory (SF)”. The funds obtained will be used “to meet the costs of the development of the factory, which will be used to offer housing solutions to improve the current housing conditions of the target population”.

  • Clean energy: Among the greens appears the renewable energy company Genneia, which in August issued in the international market “the first corporate green bond in Argentina, maturing in 2027″, the company reported. “This bond is offered as an exchange of its ON Class XX (maturity January 2022), and is backed by the revenues of the largest wind farm in Argentina, the Madryn Wind Farm”, the company said.
  • Latest issuances: On December 21, Genneia placed two new non-negotiable obligations (ON) and obtained $67 million to build the Sierras de Ullum solar park in San Juan. In the last weeks of the year, four bonds were issued: two green bonds by Genneia, one social bond by Sumatoria and one green bond by Termoeléctrica.

It is becoming more and more common to talk about Green, Social or Sustainable Bonds and ESG ratings are already resonating in the market as a way of positioning a company in its sector,” Buffone said. “In addition, debt placements that pursue positive impact purposes are increasingly successful. This shows that the market is expectant, has a genuine interest in the subject and is willing to bet on development,” he added.

Thus, companies are increasingly motivated to review their daily practices and adopt a sustainable, social and environmental agenda.