Chile’s bold ESG ambitions powered by sustainable finance

In support to Chile’s efforts to meet bold climate change and social development targets, Scotiabank has become a top provider of sustainable finance to Chilean issuers and investors. Through the combination of decades long, local and global connectivity, the Bank is delivering innovative ESG solutions for corporate and commercial clients.

In fact, with Scotiabank recently earning #1 Bloomberg ranking for providing more than US$1.8 billion in sustainable lending and debt capital financing in Chile year-to-date¹ the Canadian-based bank is clearly focused on supporting Chile along its sustainability journey.

Chile follows disciplined sustainability path

While Chile enjoys abundant wind and solar power capability, it is unwavering in its sustainability efforts especially since the nation is vulnerable to water scarcity.

“Chile has been a leader in Latin America for setting very ambitious Nationally Determined Contribution (NDC) targets to satisfy the Paris Agreement on Climate Change,” observes Daniel Gracian, Director, Sustainable Finance, at Scotiabank. “They have embraced investments in renewable energy infrastructure, and they recently updated their energy transition plans to achieve 80% of energy production derived from renewable sources by 2030.”

“At the same time, Chile has shown great creativity in pursuing sustainable financing,” adds Gracian, who notes that, for example, in March 2022, the Republic of Chile was the first in the world to issue a sovereign, sustainability-linked bond (“SSLB”). The US$2 billion SSLB focused on Chile’s continued decarbonization efforts, with KPIs geared towards emissions reductions and increasing the use of renewable energy. “Chile has earned world-wide respect as a pioneer in sustainable financing. As a result, domestic issuers and investors are very comfortable that the country is taking their commitments seriously, with clear pathways to 2050, and both corporates and the community want to contribute to this effort.”

“Chile is well-positioned, with strong public and private sector interest in sustainability, and being purpose driven,” says Jabar Singh, SVP & President, Scotiabank Colpatria, who most recently held the role of Senior Vice President, Wholesale Banking - Chile and led a Santiago-based team offering a full range of investment and corporate banking, lending, debt and equity capital, currency and risk solutions. “This country has unparalleled competitive advantage, with enviable natural resources, including wind, solar and hydrogen, and it’s a top global producer of copper and lithium, which are important inputs to renewable energy.”

Chile is also deeply focused on the ‘S’ and ‘G’ sides of the ESG triangle, as demonstrated by past and current governments’ commitment to democracy and social supports to the population. For example, extensive health and social programs were delivered to Chile’s low- and middle-income populations throughout the COVID-19 pandemic, and, following the September 2022 National Plebiscite, the rule of law prevailed amidst voter rejection of proposed Constitutional reforms.

“The country is going through a series of reforms that adds to the uncertain local and global economic outlook. However, we expect Chile, with strong public and private sector support, to continue its strong commitment to sustainable development”, says Singh. He points out the long-standing trade, investment and political ties between Chile and Canada, which have fostered mutual respect among the two countries for the shared principles of social responsibility and institution-based, democratic governance. Singh adds that Scotiabank itself announced plans to grow its investment in Chile in 2022, through a planned C$1.3 billion transaction to increase its ownership stake in Scotiabank Chile to 99.8%, reaffirming the Bank’s commitment to the country.

Earning sustainable finance mandates

Scotiabank has emerged as a preferred sustainable finance provider to Chilean companies. Between July 2021 and June 2022 alone, it advised institutional and corporate clients for US$17.5 billion in 16 transactions.

“Clients turn to us because they appreciate our broad and deep capabilities in Chile, as well as the strong investment banking franchise we have across the Pacific Alliance countries. The local teams work hand in hand with the sector and product coverage teams based in New York and Toronto, which allows us to offer a global view of the business,” explains Singh. He highlights that Scotiabank is among the top three wholesale banks in the highly competitive Chilean banking market, and currently ranks first in corporate loans, first in domestic and international bonds, and top three in loan syndications.² “Given our leadership in the corporate and investment banking and capital markets in Chile, we are in a unique position to deliver ESG and sustainable finance products and services to our clients.”

The Bank has built strong relationships with Chilean companies thanks to its long, steady history, operating in Chile since 1990, combined with its ability to draw upon Scotiabank’s global network to effectively serve clients. “We are the only bank that is truly local and global. And, as ‘a leading bank in the Americas,’ we operate in a really connected way so we can bring the whole bank to our clients,” remarks Singh.

Gracian agrees, describing how the Chile-based team combines their understanding of client needs, market conditions and ESG considerations, with the global experience and insights of Scotiabank’s Sustainable Finance colleagues across the Americas: “This team is ever-ready to connect the right partners across the Bank, and this connectivity means we can share best practices from other countries, companies and industries, to bring a lot of value to Chilean clients.”

Singh also points out that, in light of Scotiabank’s deep, domestic banking operation in Chile, Scotiabank has the appetite to deliver ESG solutions to mid-size, commercial companies, unlike many global banks that exclusively target large corporates and multinationals.

Delivering results throughout 2022

Scotiabank’s commitment to sustainable finance in Chile is evident from a sampling of successful transactions completed in 2022, a year marked by continued worldwide political and economic uncertainty. For example, Scotiabank served as Lender and Green Coordinator of a US$250 million unsecured green loan to Engie Energía Chile, when this major energy provider sought to fund or refinance renewable energy assets and distribution architecture in support of its green financing framework.

“With our long-standing banking relationship with Engie in Chile and the Engie Group across the Americas, we understood their desire to advance their company-wide sustainability model,” recalls Gracian. “Our teams worked closely across borders to help them access financing for projects that align with the UN Sustainable Development Goals and balance people, planet and profitability.”

Scotiabank also helped bring renewable energy innovation to Chile by supporting Global Power Generation (GPG), a Naturgy Group energy generation company, in its build-out of a‘PMGD/PMG’ (small-scale solar power plants) portfolio. The Bank brought together its local and global corporate finance, sustainable finance, power and utilities, and risk management teams, among others, to serve as Sole Lender, Green Loan Coordinator, Collateral and Accounts Agent and Sole Hedge Provider. The multi-product solution, encompassing a US$55.8 million green loan, VAT facility and interest rate hedging services, will enable GPG to construct 11 solar power plants that will help Chile achieve its energy transition goals.

Scotiabank Chile’s success this year builds on a landmark transaction closed last year with ISA InterChile, a major electricity transmission provider, and part of Grupo ISA of Colombia. Scotiabank stood out for assisting ISA in bringing sustainability to Chile’s energy market, including the installation of electricity transmission lines to supply low-carbon and renewable energy to the national power grid. Scotiabank acted as a Global Coordinator, Green Structuring Agent and Joint Bookrunner when ISA made its debut transaction in international debt capital markets, issuing US$1.2 billion senior secured green notes due in 2056.

Noting that this transaction ranked as one of the largest green project bonds in Latin America and the Caribbean in the power and utility sector to date³ and was recognized as ‘ESG Deal of the Year’ in the 2021 LatinFinance Awards, Singh credits the teamwork across the Scotiabank group: “This was a highly complex and time-sensitive transaction that involved intense cooperation across our local and regional Corporate and Investment Banking teams, and our global Sustainable Finance, Debt Capital Markets, Risk Management, Syndication and Power and Infrastructure colleagues. We’re ready to galvanize our people whenever a need arises for our clients.”

Scotiabank also extended its strengths to high-potential, smaller companies with dynamic net-zero aspirations. For instance, the Bank served as Lender and Sustainability Coordinator to AZA Acero Sostenible (AZA), a private entity that has grown to become the largest producer of recycled steel in Chile. To help AZA leverage its ‘green steel’ to help Chile become more sustainable, Scotiabank provided a sustainability-linked term facility with incentive mechanisms to encourage the company to reach its emissions reduction targets in the steel production process. AZA’s sustainability commitments also support energy and water efficiency, renewable energy use, and workplace gender equity.

Scotiabank also acted as Financial Advisor and Joint Bookrunner to Companía Chilena Fósforos, a respected Chilean-based producer and distributor of safety matches and forestry operator, for a green loan that will enable Fósforos to expand its FSC certified wooden utensils business. Scotiabank’s Commercial Banking and Global Banking and Markets divisions worked closely to coordinate the optimal solution for this fast-growth organization.

Singh, who was recently appointed to the role of SVP & President, Scotiabank Colpatria, has passed the torch in Chile to Jose Jorge Rivero, as Senior Vice President and Head, Wholesale Banking, Chile. With optimism for the business in Chile, he concludes: “With Scotiabank’s dedication to clients in the Chilean market, alongside the Bank’s own commitments to mobilize $350 billion in climate-related capital by 2030⁴, we’re applying our local and global skills, capital, and ideas to help this highly ambitious and focused country lead the region in sustainable business and development.”

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