Santander and San Miguel spearhead Argentina's pioneering Sustainability Linked Bond surpassing USD 50 million
In a significant stride towards sustainable investments, Santander Argentina and San Miguel, a leading company in the Southern Hemisphere's fresh citrus fruits and processed foods sector, have jointly issued the first Sustainability Linked Bond (SLB) in Argentina.
José Bandin, Head of Corporate and Investment Banking at Santander Argentina, expressed pride in accompanying enterprises in their growth process, particularly in the search for environmentally responsible financing alternatives. San Miguel's Global Director of Strategy and Finance, Juan Massot, reiterated that sustainability is an integral part of their production processes and stakeholder relationships.
SLBs are a type of bond where the issuer commits to achieving specified sustainability or Environmental, Social, and Governance (ESG) performance targets. The bond's financial characteristics, such as the interest rate (coupon), are linked to the issuer’s ability to meet these pre-agreed sustainability performance targets (SPTs), usually measured by key performance indicators (KPIs).
San Miguel has committed to meeting a sustainability indicator: supplying 66% of the electricity of the Famailla Industrial Complex from renewable sources over a period of 12 months. This goal is expected to generate an average saving of 6,300 tn CO2 per year.
The SLB's verification will be conducted annually, with a report from the independent auditor, Price Waterhouse Cooper. FIX (Fitch's Argentine subsidiary) will provide independent verification of the framework for the SLB issued by San Miguel.
The Nicholson y Cano law firm provided legal advice to San Miguel throughout the SLB process. The placement of the SLB was led by Santander Argentina and was awarded for USD 50,006,468.
Santander Argentina, the leading private entity in the Argentine financial system by volume of deposits, has reaffirmed its commitment to sustainable investments. In the first half of the year, Santander participated in 32 issues for more than ARS 122,000 million, representing 79% of the total corporate bond market.
The SLB structure allows the issuer's ESG policies to be linked to a market instrument, opening a very attractive horizon of opportunities for other companies and investors in this transition process. Issuers of SLBs are committing explicitly to future improvements in sustainability outcome(s) within a predefined timeline.
Ignacio Lorenzo, Head of Santander's Global Debt Financing, stated that Santander has a huge responsibility and commitment in the transition to a low-carbon economy. The International Capital Market Association’s (ICMA) 2024 Sustainability-Linked Bond Guidelines provide a framework for issuance and best practices, ensuring standardization and credibility. The evolving market also encourages incorporating nature-related KPIs and “green enabling projects” as part of sustainability strategies.
In summary, SLBs work by financially incentivizing issuers to achieve sustainability targets through variable bond terms linked to measurable ESG outcomes, thereby promoting sustainable business practices while providing investors with a performance-linked return profile.
- Corporate governance at Santander Argentina is prioritizing sustainability initiatives, as demonstrated by their issuance of the first Sustainability Linked Bond (SLB) in Argentina, following ICMA's guidelines to incentivize sustainable business practices.
- The integration of science and technology is evident in the SLB structure, where key performance indicators (KPIs) are used to measure an issuer's progress towards specified sustainability targets, such as San Miguel's commitment to supplying 66% of electricity for the Famailla Industrial Complex from renewable sources.
- This collaboration between business and finance sectors, as exemplified by the partnership between Santander Argentina and San Miguel in issuing the SLB, aims to address major environmental issues like climate-change by encouraging environmental-science-focused objectives, such as the reduction of CO2 emissions.
