[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.
[email protected] / 01 800 Nafinsa (623 4672)
Av. Insurgentes Sur 1971, Col. Guadalupe Inn,
CP 01020 México D.F.
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 post-
deal reporting and transparency about use of
proceeds:
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.
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.
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
Installed
Capacity
Energy
Production
Wind Farm Coahuila $54.8 199.5 698.7
Wind Farm Zacatecas $58.5 130.0 337.2
Wind Farm Baja California $37.9 155.1 374.6
Wind Farm Nuevo León 1 $34.6 126.0 452.0
Wind Farm Nuevo León 2 $34.4 126.0 452.0
Wind Farm Oaxaca 6 $43.9 137.5 470.0
Wind Farm Oaxaca 5 $34.9 160.0 578.7
Wind Farm Oaxaca 4 $33.0 164.0 514.6
TOTAL $332.1 1,198.1 3,877.8
Project Name
NAFIN
Investment(US$ in
million)(1)(2)
(in MW)
(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 2016. Figures in MXNmm
provided by NAFIN.
[email protected] / 01 800 Nafinsa (623 4672)
Av. Insurgentes Sur 1971, Col. Guadalupe Inn,
CP 01020 México D.F.
3
Pending US$168mm disbursements are
hold in our liquidity portfolio, invested in
overnight and short-term Investments.
b) Carbon impact reporting.
These eight wind projects are calculated to
reduce, in whole, CO2 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 0.454 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.
Green Portfolio: Nafin's Funded Wind Energy Projects
Factor (tons of CO2
emissions reduced
per US$1millon
invested)
Project total
reduction of
Greenhouse Gases
NAFIN reduction
of Greenhouse
Gases
(tCO2/US$1million) (US$ in
million)(1)(2)
t-CO2 t-CO2
Wind Farm Coahuila 904 $54.8 317,209 49,547
Wind Farm Zacatecas 451 $58.5 153,088 26,384
Wind Farm Baja California 535 $37.9 170,062 20,288
Wind Farm Nuevo León 1 631 $34.6 205,203 21,817
Wind Farm Nuevo León 2 631 $34.4 205,203 21,739
Wind Farm Oaxaca 6 917 $43.9 213,378 40,242
Wind Farm Oaxaca 5 1,011 $34.9 262,751 35,345
Wind Farm Oaxaca 4 891 $33.0 233,628 29,439
TOTAL 5,973 $332.1 1,760,524 244,801
(1) Using the FX rate of MXN 19.3776 per $US1, the exchange rate published by Banco de Mexico on September 30,2016.
(2) Considering outstanding balance as of September 2016. Figures in MXNmm provided by NAFIN.
Project Name
NAFIN
Investment
[email protected] / 01 800 Nafinsa (623 4672)
Av. Insurgentes Sur 1971, Col. Guadalupe Inn,
CP 01020 México D.F.
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 199.5 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 2017.
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 2017.
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.
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 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.
© 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 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.