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Superfoods also take care of Amazonia’s health
The development of sustainable value chains for quinoa, cocoa, sesame, and other high-nutritional-value crops can foster integration into international markets, benefit the region, and contribute to sustainable development goals.
By Adopting Traceability in Its Supply Chain This Company Managed to Become More Sustainable
In a world where sustainability is part of the DNA of business, an Ecuadorian company implemented standards to guarantee socially just and ecologically respectful practices throughout the value chain.
A Global Movement for Sustainable Growth Sprouts in the Heart of Amazonia
IDB Invest Sustainability Week 2024 brings together an array of public and private sector stakeholders, the impact investors community, governments, international organizations, and civil society in Manaus with one goal: scaling up impact.
Why is additionality key for private sector development finance?
To meet the ambitious targets laid out by the Sustainable Development Goals (SDGs), it is necessary to accelerate collective action, coordination, and resource mobilization across the public and private sectors. Public sector resources alone are not sufficient to bring development finance from the “billions to trillions” required to achieve the SDGs.
How can character count toward identifying good credit clients?
The financing gap for micro, small and medium-sized enterprises (MSMEs) in Latin America and the Caribbean was estimated at $1.2 trillion in 2017, nearly a quarter of the global emerging market total. If this gap were a country, not only would it be a credit desert for most inhabitants, but it would edge out Mexico as number 15 on the list of the world’s largest economies in terms of nominal gross domestic product (GDP).
Business tackling gender violence: An economic imperative
The private sector has a moral obligation to set the goal of eradicating violence against women. However, this is also an economic imperative, given that corporate inaction in this regard has significant costs.
What is a future flow securitization and what are the benefits?
Imagine that you represent an operationally strong company in a small or island country. You have helped it grow a business line specifically linked to the export of an essential product (oil or copper, for example) or the processing of financial transfers from abroad (credit cards, remittances, etc.), and see promising projections for the future. In addition, you want to diversify your current funding sources, which come from more traditional sources like commercial banks or nonfinancial institutions. Did you know that the existing and future cash flows of your business could be used to obtain another source of financing? This is how the securitization of future flows works, a little-known alternative with multiple benefits for the companies of Latin America and the Caribbean. A future flow securitization allows an enterprise (bank or corporate) to monetize existing and predictable cash flows expected to continue over the ordinary course of your business. The flows generated by the company are used to pay the debt service to the investors on the financing. Some examples of future flows from assets that are used in capital markets include: 1) Future financial flows like payments on receipts from international credit cards (Visa, MasterCard, American Express, among others), family remittances, and payments of foreign direct investment; and 2) Future flows of companies such as payments for exports of aluminum or zinc, or dollar-denominated payments from the sale of airline tickets, and other items. Generally, future flow securitizations in foreign currency involve the creation of a special purpose vehicle (SPV) in a jurisdiction different from that of the company that is the originator of the flows. The originator, through a true sale, backed by a legal opinion from an accredited law firm, sells ownership of the future flows to the SPV. The establishment of an SPV outside the country of the originator company allows the investors to mitigate some risks such as convertibility and transfer risks. In many cases, this reduced risk materializes when an international risk rating is obtained for future flow financing that is higher than the rating for the company itself (which entails a reduction in the cost of financing). In other words, both companies and investors benefit. The following graph presents a diagram of flows in a future flow financing transaction: What are the advantages of future flow financing? Long-term financing: The terms tend to be longer than the financing from commercial banks. They can be between five and ten years. Recently, IDB Invest approved the subscription of a note to be issued by the future flows program of the Federación de Cajas de Crédito y Bancos de los Trabajadores (Fedecredito) for $15 million with a seven-year term. Diversified funds platform: Facilitates the creation of a financing platform that allows multiple issuances, provided the minimum debt coverage and flow growth requirements are met. This allows for the participation of multiple institutional investors over time. Impact on development in small and island countries: The ability to mitigate certain sovereign risks in these transactions allows investors to invest with greater security in activities that produce an impact on the development of the region. In 2013, Banco Industrial Guatemala issued a ten-year bond, in which the IDB Group acquired $150 million, to increase access to financing for micro, small, and medium-sized enterprises, with a special focus on rural areas and women-led businesses in Guatemala. Securitizations of future flows are a source of alternative funding that can help to enhance your company’s growth, improve risk management in your company, and expand the base of funding sources to include international institutional investors. If you want more information, we invite you to visit our webpage on capital markets solutions. Subscribe to receive more content like this! [mc4wp_form]
Four insights for banks willing to seize sustainable finance opportunities
Attitudes towards environmental, social and governance factors are changing across the investment and lending community in Latin America and the Caribbean. Financial impacts associated with extreme weather events, growing regulatory and industry pressures on climate-related risk disclosure, and enhanced availability of data, are key aspects influencing companies’ views of environmental, climate, social and governance (ESG) factors. As a result, the role of ESG analysis is shifting from an ancillary function to an integral part of fundamental analysis and new business propositions. IDB Invest’s annual Sustainability Week (Lima, Peru – May 7-9, 2018) took a pulse on this shift, exploring wider sectoral trends within agribusiness, infrastructure, and banking sectors. For the financial community, in particular, there were four key messages from Sustainability Week:
All-inclusive hotels: A key for Latin America and the Caribbean’s growth
The traditional all-inclusive concept has significantly evolved in recent years to better adapt to changing consumer preferences, demographics and booking patterns. Guest behavior and expectations are being reshaped by a shift in consumers’ mindset towards travel and the disruptive impact of technology. Travelers are increasingly seeking personalization and authenticity in their vacation experiences, more involvement and connection with the local community, and a genuine engagement in environmentally responsible practices—all of this while maintaining full control of their choices and increasingly relying on mobile and electronic devices as a preferred booking method. A revamped all-inclusive 2.0 model is becoming more sensitive to these consumer needs and undergoing an exciting metamorphosis.