[email protected] / 01 800 Nafinsa (623 4672) Av. Insurgentes Sur 1971, Col. Guadalupe Inn, CP 01020 México D.F. 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 2013-2018, 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: “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 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, 2016. This issuance was the first listed in the Mexican Stock Exchange segment dedicated to green bonds.
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NAFIN’S ANNUAL GREEN BOND REPORT · NAFIN’S ANNUAL GREEN BOND REPORT I. Green Commitment. In line with the objectives of the Federal Government focused on promoting Sustainable
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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 Key Performance Indicator (KPI)
Renewable Energy 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.
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 332.1 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 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.
All eight projects reviewed complied with the Use of Proceeds criteria
None
Reporting Criteria 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 Reporting criteria
None
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, 0.454 for 2014) (2) Considering outstanding balance as of September 2016. Figures in MXNmm provided by NAFIN.
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.
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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. 2nd 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 332.1 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.
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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
☐ Documented process to determine that projects fit within defined categories
☐ Summary criteria for project evaluation and selection publicly available
☐ Other (please specify):
Information on Responsibilities and Accountability
☐ Evaluation / Selection criteria subject to external advice or verification
☐ In-house assessment
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☐ 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):
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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. 2nd opinion) ☐ Certification
☐ Verification / Audit ☐ Rating
☐ Other (please specify):
Review provider(s): Date of publication:
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ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE GBP
(i) 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.
(ii) 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.
(iii) 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.
(iv) 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.