Environmental Finance's Bond Awards 2021

Award for innovation - bond structure (social bond); initiative of the year - social bond: Davivienda/IDB Invest

Patrick MispagelThe awards for Innovation for social bond structure and Initiative of the year - social bond go to Banco Davivienda and IDB Invest for their work on the world's first gender-linked bond based on achieving outcomes.

The issue from Davivienda is the first gender bond in South America aligned with international standards and the first deal in Colombia that is part of the Women Entrepreneurs Financing Initiative (We-Fi), an international alliance that aims to unlock financing and access to markets for companies led by women.

Proceeds from the issue, acquired in full by IDB Invest, will be exclusively used to finance the growth of its women-led SMEs portfolio (WSMEs), as well as the purchase of social interest houses by women in Colombia.

The funds will be used to provide new financing for working capital, purchase of inventory or investment of capital and fixed assets to clients in the SMEs segment led by women, as well as to grant mortgage loans for the acquisition or remodelling of new or used social housing by women.

The deal, worth COP362,500 million ($100 million), has a seven-year maturity and was structured and subscribed by IDB Invest.

IDB Invest advised Davivienda in the design of the methodological framework for the use of proceeds, criteria for selection, monitoring and evaluation of projects, and alignment with the Social Bond Principles of the International Capital Market Association (ICMA). A second-party opinion was provided by Vigeo Eiris (V.E), an affiliate of Moody's.Women Entrepreneurs Financing Initiative (We-Fi)

"We are proud to have supported Banco Davivienda and IDB Invest's award-winning social bond, the first gender-focused issuance in South America that is aligned with international standards. This landmark issuance aims to address structural gender inequalities in Colombia and Latin America. Redirecting capital in favour of gender-focused initiatives is critical to build sustainable, inclusive and innovative growth. Social bonds volumes tripled in 2020 and we would expect to see sustained momentum as issuers and investors place greater emphasis on socially impactful projects beyond the pandemic," commented Patrick Mispagel, managing director - sustainable finance at Moody's ESG Solutions.

The Environmental Finance Bond Awards judges singled the bond out as being a "good example of a successful issuance/structure that others can leverage" and praised it for its focus on "an area that needs further growth". Another was pleased to see a social bond in 2020 that is "not only about covid but another topic, and important projects."

Through the We-Fi initiative, IDB Invest will grant a $300,000 bonus over a period of five years as certain outcomes are achieved, in this case the expansion of the WSMEs loan portfolio from 20% to 27% (6,500 loans approximately). The bonus will be disbursed annually in the amount of $60,000 after progress assessment.

"Women are the centre of families and communities. They manage the budget and family finances, and they play an essential role in society. By empowering them, we are multiplying the opportunities for the country to progress. 55% of personal banking products are held by women compared to 45% by men. Thus, we see opportunities to close gender gaps by designing inclusive products and services that help women to achieve objective," commented Maritza Pèrez, vice president of personal banking and marketing at Davivienda."

Judges praised the initiative for its "uniqueness" and for "focusing on a specific target group in a region that could use more attention with regards to social project finance". Another praised it for achieving the dual objectives of "improving gender inequality and economic inequality via WSMEs".

Deal Highlights

Issuer:  Davivienda
Size: COP362,500 million ($100 million)
Maturity: 25 August 2027
Use of Proceeds:  Employment generation including through the potential effect of SME financing and microfinance
External Reviewer:  V.E
Other highlights/notable features: First issue of a gender-linked bond based on achieving outcomes and the first gender-focused social bond in South America that is aligned with international standards