The International Finance Corporation (IFC) plans to release a second tranche of a sustainability-linked loan to Corsan, the water and sanitation company of the Brazilian state of Rio Grande do Sul, by the end of the year, Carlos Leiria Pinto, IFC’s country manager in Brazil, told LatinFinance.
IFC, the private sector lending arm of the World Bank, extended a first tranche of BRL300 million ($55.8 million) loan to Corsan in April as part of a “showcase program” to help the company achieve a target to curb its water distribution losses, he said.
It was IFC’s “first sustainability-linked loan in infrastructure in Latin America,” he said.
“If they succeed in reducing the non-revenue waters from 44% to 35% [by 2024], the cost of the debt is also reduced. The spread that we are charging is reduced,” Leiria Pinto said. “This is a way to motivate Corsan to invest in a very efficient manner.”
IFC declined to share details of either the financial incentive or the amount of the second tranche.
GROWING INTEREST
Leiria Pinto said “several other utilities” have expressed interest in this kind of sustainability-linked loan.
He added that IFC wants to encourage the private sector to avoid “greenwashing” and to adopt actual sustainable policies.
“The private sector is very aware of what is going on, that they need to change to become truly sustainable. Some of them may be doing greenwashing, but a number of them realize it is for real,” he said. “We see a lot of appetite in making all the necessary changes so that they can issue this kind of climate finance products.”
IFC said it committed an all-time high of $1.85 billion in Brazil during the last fiscal year (ended in June), including $1.1 billion from its own account, which was almost twice as much as in the previous fiscal year. It said projects with climate components accounted for 60.7% of the latter.