In Q4 2016, Bancolombia, the largest commercial bank in Colombia, sought to secure fresh capital to help finance renewable energy and sustainability projects that would help the bank and the country meet increasingly stringent climate change targets.
The bank engaged with the IFC, the private sector arm of the World Bank, and in December became the first Colombian private sector entity to place a green bond in the country’s markets.
On 5 December 2016, Bancolombia sold the COP305mn (approx.US$115mn) 7-year unlisted notes at par, paying a coupon of IBR+220bp.
Bancolombia adhered to the Green Bond Principles in structuring the bond. The 2023 notes were issued in Colombia’s Segundo Mercado, and sold entirely to the IFC.
The bullet bond will allow the bank to diversify its sources of funding while showing its strong commitment to sustainable finance. Bancolombia will use the proceeds from the sale of the bond to expand its financial services for the private sector and encourage investments that help to address climate change, following its commitment to reduce its environmental footprint.
The move could make way for other issuers to tap into sustainability-focused pockets of liquidity. It was also well- timed. The country’s Financial Management Committee SICLIMA of Colombia and the Climate Bonds Initiative is currently developing a Colombian Strategy Framework for Climate Funding, which could form part of the government’s plan to create a market for sustainable finance, and help it achieve its climate change goals.
The strategy, an outline of which is due to be released in April 2017, aims to see the development and adoption of an efficient market for green bonds in Colombia.