According to an article published on the IDB Invest blog, sophisticated financial instruments can be of great help in catalyzing the transition towards a more sustainable, resilient, and just economy. For the authors, an example of this is represented by the recent case of the first issuance of an international subordinated bond by the Colombian bank, Banco de Bogotá (BdB).

BdB is the oldest financial institution in Colombia and is the main subsidiary of Grupo Aval. It issued a 10-year subordinated bond, worth 230 million dollars and subscribed by IDB Invest. The resources will be used to finance its social portfolio for micro, small, and medium-sized enterprises (MSMEs), led and owned by women, and also for low-income and priority housing. Furthermore, BdB will finance green buildings, renewable energy, energy efficiency projects, circular economy, and sustainable agriculture, among others.

By structuring the project as a sustainable bond, it adds value by setting tangible goals under project selection, monitoring and evaluation criteria aligned with the Sustainable Bond Principles of the International Capital Markets Association (ICMA).

Another advantage for the authors, is the value added due to the fact that they have created a model to follow to attract more international capital, aligning standards and requirements of international entities. IDB Invest will subscribe 80 million dollars, while other investors will participate with 75 million dollars from the International Finance Corporation, 50 million dollars from the Canadian Development Institute, and 25 million dollars from the LAGreen Fund and the Eco Business Fund (funds managed by Finance in Motion).