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Brazil’s BNDES unveils $144m green bond fund for renewables

Brazil’s National Development Bank (BNDES) has launched its R$500m ($144m) Sustainable Energy Fund (Fundo de Energia Sustentável) aiming to bolster the country’s fledgling local-currency green bond and tax-exempt infrastructure bond markets.

The 15-year fund will invest in the so-called local-currency infrastructure bonds – known as infrastructure debentures – issued by renewable project developers, including wind and solar project sponsors that are financed by BNDES itself.

BNDES’s equity investment arm, BNDESPar will invest up to 50% in the fund, which will also be open to private investors.

The decision to launch the fund comes as the Brazilian government seeks to boost private financing for the renewables industry, which is heavily reliant on BNDES. Local currency denominated infrastructure bonds – which were launched in 2011 – are part of the government’s plan to bolster capital market investment in renewables, complementing the more than R$25bn that BNDES has invested in wind alone.

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Local capital market financing for wind projects has not taken off so far, so the new fund is expected to help create demand by acquiring new and existing issues, which share BNDES guarantees, aiming to overcome the main barrier to the expansion of the bond issues – the lack of a secondary market.

“Aside from creating a new vehicle for financing infrastructure projects, which could be copied by other market agents, BNDES hopes that this initiative will create demand for green bonds in Brazil, increase the number of investors in infrastructure, and [increase] the liquidity of such bonds,” the bank says in a statement.

According to BNDES, in the coming 18 months local wind power players are expected to issue a total of R$1.7bn in local infrastructure debentures.

This week, BNDES will kick-off a tender to select the new fund’s manager, which will be hired by March. By July 2017, the bank hopes that the fund will be fully operational.

BNDES also said the fund will partner with the Climate Bonds Initiative aiming to attract foreign investors, and possibly help Brazilian companies tap the global green bond market. 

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