NAFIN S ANNUAL GREEN BOND REPORT

Transcription

1 As of November 03,2016 NAFIN S ANNUAL GREEN BOND REPORT I. Green Commitment. In line with the objectives of the Federal Government focused on promoting Sustainable Development in Mexico, stated in the National Development Plan , NAFIN positions itself as a strategic development bank to meet the environmental goals of the Federal Government on the transition to a low carbon economy. Our objective consists of granting short, medium and long-term funding to national and international companies and financial intermediaries, which promote projects in Mexico that lead to an ecological, economic and social development. NAFIN participated actively in several initiatives and conferences focused on recent innovations in the Green and Sustainability Bond Market in LatAm and Mexico such as: Development between GIZ and SEB: Green Bond Workshop for banks, investors and issuers in the panel Case study: NAFIN s last two Green Bond transactions. Dialogue for investment strategies aligned to the Paris Agreement hosted by National Institute of Ecology and Climate Change (INECC). Finally, in line with our mandate to develop domestic capital markets and fostering the Green Bond Market in Mexico, NAFIN issued a MXP 2,000 million 7-year Green Bond to yield and coupon of 6.05%, this offering represents the First Green Bond in Mexican Pesos on August 31, This issuance was the first listed in the Mexican Stock Exchange segment dedicated to green bonds. Project & Infrastructure Finance Summit organized by LatinFinance in the panel Greener Pastures: Funding Strategies in Renewables Markets. Within the framework of the Dual Year Mexico-Germany: Dialogues for Sustainable Projects in the panel Green Bonds as a new economic instrument in Mexico. Within the framework of a Strategic Alliance on Green Bond Market info@nafin.gob.mx / Nafinsa ( ) Av. Insurgentes Sur 1971, Col. Guadalupe Inn, CP México D.F. 1

2 II. Green Bond denominated in US dollar framework. On October 29, 2015, NAFIN issued a US$500m Green Bond. The net proceeds from the issuance of the notes are used to finance eligible wind energy generation projects in Mexico. We obtained a positive second-party review from Sustainalytics and the certification by the Climate Bond Initiative. NAFIN was three times awarded for this transaction, recognizing innovation and postdeal reporting and transparency about use of proceeds: III. Use of proceeds. Eligibility criteria Activities generating energy from wind are eligible for the use of proceeds of the bond. These activities specifically, refer to the development and construction of wind farms and/or wholly dedicated transmission infrastructure for wind farms. Eligible Projects means financing of, and/or investments in wind energy projects; i. committed after or before the issuance of the Notes; or ii. are funded or disbursed after the issuance of the Notes; or iii. are funded or disbursed during previous financial year. Management of proceeds. a) Allocation. First Green Bond-Mexico granted by Climate Bonds Initiative. Bond of the year SSA (Sovereigns. Supranationals and Agencies) granted by Environmental Finance. Latin American Green /SRI Bond Deal of the year granted by Global Capital. Following the guidance of Green Bond Principles, we are distributing this report as of the first anniversary of the issuance, along with the compliance review provided by Sustainalytics. As of September 30, 2016, NAFIN s wind energy green portfolio amounts US$332.1mm and is integrated by eight wind projects with a total installed capacity of 1,198MW. Green Portfolio: Nafin's Funded Wind Energy Projects NAFIN Installed Energy Project Name Investment Capacity Production (US$ in (in MW) million) (1)(2) Wind Farm Coahuila $ Wind Farm Zacatecas $ Wind Farm Baja California $ Wind Farm Nuevo León 1 $ Wind Farm Nuevo León 2 $ Wind Farm Oaxaca 6 $ Wind Farm Oaxaca 5 $ Wind Farm Oaxaca 4 $ TOTAL $ , ,877.8 (1) According to the financial model. FX Rate used is the exchange rate reported by Banco de Mexico on September 30, 2016: MXN (2) Considering outstanding balance as of September Figures in MXNmm provided by NAFIN. info@nafin.gob.mx / Nafinsa ( ) Av. Insurgentes Sur 1971, Col. Guadalupe Inn, CP México D.F. 2

3 Green Portfolio: Nafin's Funded Wind Energy Projects Project Name Factor (tons of CO2 emissions reduced per US$1millon invested) NAFIN Investment Project total reduction of Greenhouse Gases NAFIN reduction of Greenhouse Gases (US$ in (tco2/us$1million) million) (1)(2) t-co2 t-co2 Wind Farm Coahuila 904 $ ,209 49,547 Wind Farm Zacatecas 451 $ ,088 26,384 Wind Farm Baja California 535 $ ,062 20,288 Wind Farm Nuevo León $ ,203 21,817 Wind Farm Nuevo León $ ,203 21,739 Wind Farm Oaxaca $ ,378 40,242 Wind Farm Oaxaca 5 1,011 $ ,751 35,345 Wind Farm Oaxaca $ ,628 29,439 TOTAL 5,973 $ ,760, ,801 Pending US$168mm disbursements are hold in our liquidity portfolio, invested in overnight and short-term Investments. (1) Using the FX rate of MXN per $US1, the exchange rate published by Banco de Mexico on September 30,2016. (2) Considering outstanding balance as of September Figures in MXNmm provided by NAFIN. b) Carbon impact reporting. These eight wind projects are calculated to reduce, in whole, CO 2 emissions by 1.76 million tons per year, of which 244,801 tons corresponds to NAFIN s investment. The reduction of greenhouse gases is calculated following the methodology of the Centro de Estudio de Tecnologías Energéticas Renovables, considering an annual electricity factor of tco2/mwh: In addition, NAFIN defined a factor of tons of CO2 emissions reduced per US$1millon invested (tco2/us$1million) for each project: Funds monitoring The loan balance, disbursements and repayments are monitored through our internal loan tracking system (SIRAC). On a daily basis, the International Treasury Department consults the latest updated loan balance shared by the Sustainable Projects Department and identifies the pending disbursements amount, which are held in the liquidity portfolio, and invests them in overnight and short-term financial instruments. info@nafin.gob.mx / Nafinsa ( ) Av. Insurgentes Sur 1971, Col. Guadalupe Inn, CP México D.F. 3

4 IV. Example of projects funded. Wind Farm in Coahuila Nafin was mandated as the structuring bank and administrative agent of the senior and VAT credits of the project. The project consists of the construction and operation of a wind farm of MW that will supply electric power to Industrias Peñoles. The financial closing was in June 2016 and the commercial operation date is estimated in April The main environmental and social impacts of the project are: Annual production of 698.7GWh; enough for regular consumption of approximately 87,000 households. Annual CO2 emission reduction of 317,000 tons. Wind Farm in Zacatecas The group of banks funding the project is comprised by two foreign financial institutions and Nafin, the only Mexican bank that participated in the operation with an amount equivalent to 22% of total investment. The Project consists of the construction and operation of a wind farm of 130 MW that will supply electric power to Volkswagen. The financial closing was in November 2015 and the commercial operation date is estimated in March The main environmental and social impacts of the project are: Annual production of 337.2GWh; enough for regular consumption of approximately 42,000 households. Annual CO2 emission reduction of 153,000 tons. V. External Audit. NAFIN engaged Sustainalytics to review all the projects funded through the 2015 issued bond and they concluded all eight projects complied with the use of proceeds and reporting criteria. For more details, please find the Compliance Review in the next pages. info@nafin.gob.mx / Nafinsa ( ) Av. Insurgentes Sur 1971, Col. Guadalupe Inn, CP México D.F. 4

5 NAFIN GREEN BOND PROJECTS REVIEW October 19, 2016 Introduction In October 2015, Nacional Financiera, S.N.C, ( NAFIN ) issued a green bond aimed at funding eligible wind energy generation projects in Mexico. In October 2016, NAFIN engaged Sustainalytics to review all the projects funded in 2015 through the issued green bond, and provide an assessment as to whether the projects met the Use of Proceeds criteria and the Reporting commitments outlined in the Green Bond Framework. Compliance Evaluation Criteria Sustainalytics evaluated all eight wind farm projects for compliance based on whether the projects: 1. Met the Use of Proceeds criteria outlined in the Green Bond Framework 2. Reported on two Key Performance Indicators (KPIs) outlined in the Green Bond Framework Sustainalytics has not verified the methodology or accuracy of the carbon emissions data reported as part of this engagement. Table 1 lists the Use of Proceeds and Reporting criteria. Table 1: Use of Proceeds and Reporting Criteria Use of Proceeds criteria Renewable Energy Key Performance Indicator (KPI) Energy produced from renewable sources CO2e or other GHG Emissions reduced or avoided Issuing Entity s Responsibility NAFIN is responsible for providing accurate information and documentation relating to the details of the project that has been funded, including description of projects, estimated and realized costs of projects, and project impact.

6 Sustainalytics 2016 Independence and Quality Control Sustainalytics, a leading provider of ESG and corporate governance research and ratings to investors, conducted the verification of NAFIN s Green Bond Framework and provided an independent opinion. The work undertaken as part of this engagement included conversations with relevant NAFIN employees and review of relevant documentation to confirm the conformance with the Green Bond Framework. Sustainalytics made all efforts to ensure the highest quality and rigor during its assessment process and enlisted its Sustainability Bonds Review Committee to provide oversight over the assessment of the review. Exceptions No exceptions were identified. All projects aligned with the Renewable Energy Use of Proceeds criteria as well as the Reporting criteria. Conclusion Based on the limited assurance procedures conducted, nothing has come to Sustainalytics attention that causes us to believe that, in all material respects, the allocation of USD million from NAFIN s green bond, issued to fund eligible green projects, is not in conformance with the Use of Proceeds and Reporting criteria outlined in the NAFIN Green Bond Framework. Detailed Findings Table 2: Detailed Findings Eligibility Criteria Procedure Performed Factual Findings Error or Exceptions Identified Use of Proceeds Criteria Reporting Criteria Verification of eight projects funded by the green bond in 2015 to determine if projects aligned with the Use of Proceeds Criteria outlined in the Green Bond Framework and above in Table 1. Verification of eight projects funded by the green bond in 2015 to determine if impact of projects was reported in line with the KPIs outlined in the Green Bond Framework and above in Table 1. All eight projects reviewed complied with the Use of Proceeds criteria All eight projects reviewed complied with the Reporting criteria None None

7 Appendix 1: List of Projects Reviewed and Project Impact (1) Calculated as per the Centro de Estudio de Tecnologías Energéticas Renovables methodology: t-co2=annual Production (MWh/year) *Annual Electricity Factor (tco2/mwh, for 2014) (2) Considering outstanding balance as of September Figures in MXNmm provided by NAFIN.

8 Disclaimer All rights reserved. No part of this review may be reproduced, transmitted or published in any form or by any means without the prior written permission of Sustainalytics. This review document is for information purposes only and Sustainalytics will not accept any form of liability for the substance of the review and/or any liability for damage arising from the use of this review document and/or the information provided in it. As the review is based on information made available by the client, Sustainalytics does not warrant that the information presented in this review document is complete, accurate or up to date. Nothing contained in this review document shall be construed as to make a representation or warranty, express or implied, regarding the advisability to invest in or include companies in investable universes and/or portfolios. Furthermore, this review document shall in no event be interpreted and construed as an assessment of the economic performance and credit worthiness of the bond.

9 Green Bond / Green Bond Programme External Review Form Section 1. Basic Information Issuer name: Nacional Financiera, S.N.C, ( NAFIN ) Review provider s name: Sustainalytics Completion date of this form: October 17, 2016 Section 2. Review overview SCOPE OF REVIEW The following may be used or adapted, where appropriate, to summarise the scope of the review. The review assessed the following elements and confirmed their alignment with the GBPs: Use of Proceeds Process for Project Evaluation and Selection Management of Proceeds Reporting ROLE(S) OF REVIEW PROVIDER Consultancy (incl. 2 nd opinion) Certification Verification Rating Other (please specify): Annual Compliance Review Note: In case of multiple reviews / different providers, please provide separate forms for each review. EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable) In October 2015, Nacional Financiera, S.N.C, ( NAFIN ) issued a green bond aimed at funding eligible wind energy generation projects in Mexico. In October 2016, NAFIN engaged Sustainalytics to review all the projects funded in 2015 through the issued green bond, and provide an assessment as to whether the projects met the Use of Proceeds criteria and the Reporting commitments outlined in the Green Bond Framework. Based on the limited assurance procedures conducted, nothing has come to Sustainalytics attention that causes us to believe that, in all material respects, the allocation of USD million from NAFIN s green bond, issued to fund eligible green projects, is not in conformance with the Use of Proceeds and Reporting criteria outlined in the NAFIN Green Bond Framework. 1

10 Section 3. Detailed review Reviewers are encouraged to provide the information below to the extent possible and use the comment section to explain the scope of their review. 1. USE OF PROCEEDS Overall comment on section (if applicable): All eight projects reviewed complied with the Use of Proceeds criteria. Use of proceeds categories as per GBP: Renewable energy Energy efficiency Pollution prevention and control Sustainable management of living natural resources Terrestrial and aquatic biodiversity conservation Clean transportation Sustainable water management Climate change adaptation Eco-efficient products, production technologies and processes Other (please specify): Unknown at issuance but currently expected to conform with GBP categories, or other eligible areas not yet stated in GBPs If applicable please specify the environmental taxonomy, if other than GBPs: 2. PROCESS FOR PROJECT EVALUATION AND SELECTION Overall comment on section (if applicable): Not in scope. Evaluation and selection Defined and transparent criteria for projects eligible for Green Bond proceeds Summary criteria for project evaluation and selection publicly available Documented process to determine that projects fit within defined categories Other (please specify): Information on Responsibilities and Accountability Evaluation / Selection criteria subject to external advice or verification In-house assessment 2

11 Other (please specify): 3. MANAGEMENT OF PROCEEDS Overall comment on section (if applicable): Not in scope. Tracking of proceeds: Green Bond proceeds segregated or tracked by the issuer in a systematic manner Disclosure of intended types of temporary investment instruments for unallocated proceeds Other (please specify): Additional disclosure: Allocations to future investments only Allocations to both existing and future investments Allocation to individual disbursements Allocation to a portfolio of disbursements Disclosure of portfolio balance of unallocated proceeds Other (please specify): 4. REPORTING Overall comment on section (if applicable): All eight projects reviewed complied with the Reporting criteria. Use of proceeds reporting: Project-by-project On a project portfolio basis Linkage to individual bond(s) Other (please specify): Information reported: Allocated amounts GB financed share of total investment Other (please specify): 3

12 Frequency: Annual Semi-annual Other (please specify): Impact reporting: Project-by-project On a project portfolio basis Linkage to individual bond(s) Other (please specify): Frequency: Annual Semi-annual Other (please specify): Information reported (expected or ex-post): GHG Emissions / Savings Energy Savings Other ESG indicators (please specify): Energy production from installed Wind Farms Means of Disclosure Information published in financial report Information published in sustainability report Information published in ad hoc documents Other (please specify): Reporting reviewed (if yes, please specify which parts of the reporting are subject to external review): Where appropriate, please specify name and date of publication in the useful links section. USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer s documentation, etc.) SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE Type(s) of Review provided: Consultancy (incl. 2 nd opinion) Certification Verification / Audit Rating Other (please specify): Review provider(s): Date of publication: 4

13 ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE GBP (i) (ii) (iii) (iv) Consultant Review: An issuer can seek advice from consultants and/or institutions with recognized expertise in environmental sustainability or other aspects of the issuance of a Green Bond, such as the establishment/review of an issuer s Green Bond framework. Second opinions may fall into this category. Verification: An issuer can have its Green Bond, associated Green Bond framework, or underlying assets independently verified by qualified parties, such as auditors. In contrast to certification, verification may focus on alignment with internal standards or claims made by the issuer. Evaluation of the environmentally sustainable features of underlying assets may be termed verification and may reference external criteria. Certification: An issuer can have its Green Bond or associated Green Bond framework or Use of Proceeds certified against an external green assessment standard. An assessment standard defines criteria, and alignment with such criteria is tested by qualified third parties / certifiers. Rating: An issuer can have its Green Bond or associated Green Bond framework rated by qualified third parties, such as specialised research providers or rating agencies. Green Bond ratings are separate from an issuer s ESG rating as they typically apply to individual securities or Green Bond frameworks / programmes. 5