CASE STUDY: BancoEstado’s CLP50bn Bond Continues Chile’s ESG Story
Bonds & Loans
Published: 26 July 2018 10:54
The Chilean lender maintained its leading role in the country’s ESG space and continued to promote financial inclusion with the first social bond to hit the local market, priced at CLP50bn, or equivalent of USD83mn.
In recent years, BancoEstado has shown strong commitment to a socially and environmentally conscious approach, tapping the Australian and Japanese markets with innovative instruments like the Women Bond. It also recently came to the USD RegS markets with a microfinance bond.
In April 2018 the lender became the first to tap the local market with a 4-year CLP80bn ESG bond under its Social Framework, put together with the support of Credit Agricole and Sustainalytics.
On 25 April 2018 the issuer carried out bookbuilding via a Dutch auction process for the first local market social bond.
After the initial round of trading, IPTs were set at 4.37%, to eventually close at 4.25% by the end of the auction; the bond was listed on the Santiago Stock Exchange through BancoEstado S.A. Corredores de Bolsa as agent.
The strong demand for the notes was supported by a 4x oversubscription rate and a spread tightening of 40bp.
The sale targeted only local investors, which meant that many of them had little or no experience dealing with ESG-linked instruments. As such, they were curious to find out more details about the BancoEstado Social Framework underpinning its ESG borrowing programme, which includes four categories of projects: supporting women, commercial platforms for minor size companies, geographic and digital coverage to enable greater access to the financial system, and mortgages to low-to-middle income segments.
By type, two thirds of the notes (66%) were allocated to mutual funds; 16% were snapped up by portfolio managers, another 10% went to Pension funds, 6% to banks, and the remaining 2% split equally between insurance funds and brokers.
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