IDB Driving Sustainable Business Performance

DRIVING SUSTAINABLE BUSINESS PERFORMANCE Moving the Needle on Green Growth and Social Impact

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 1

Driving Sustainable Business Performance Today’s forward-thinking companies look for the latest sustainable solutions to enhance their business. The IDB partners with companies to optimize returns on investments and capital allocation sustainably. From energy efficiency and biodiversity to shared value and gender inclusion, the IDB helps to identify and design new solutions that drive sustainable business performance.

SOCIAL IMPACT WHAT IDB OFFERS

Our team surfaces untapped opportunities in two thematic areas:

Shared Value

Gender

2 | DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT

Whether a client is just beginning to explore sustainable business opportunities, or is ready to invest – the IDB’s suite of products addresses their specific needs.

• Appraisals: Through grant-based advisory services, the IDB conducts appraisals that provide clients with a roadmap on how to invest in social and/or environmental sustainability.

• Financing: When companies are ready to invest, the IDB offers debt financing, sometimes combining IDB resources alongside donor capital to absorb risks and reduce costs through concessional loans and guarantees not available in the marketplace.

GREEN GROWTH

Energy Efficiency and Self-supply Renewables

Biodiversity and Ecosystem Services

Climate-smart Agriculture

Climate Change

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 3

GRANT-BASED ADVISORY PRODUCTS FOR SUSTAINABLE PERFORMANCE Appraisal Products

SHARED VALUE

GENDER

Strategic analysis of the company’s growth challenges in context of their operating environment, costbenefit analysis, and estimated rates of return of potential shared value investments that will both improve business performance and generate social value in the surrounding communities. Roadmap to execute the identified shared value opportunity.

Strategic analysis of the company’s workforce and supply chain through a gender lens; cost-benefit analysis and estimated rates of return of potential investments to increase female participation rate in workforce and supply chain, resulting in better gender equity and inclusion and financial return.

ENERGY EFFICIENCY AND SELF-SUPPLY RENEWABLES

BIODIVERSITY AND ECOSYSTEM SERVICES

Strategic analysis of the company’s energy consumption through in-depth energy audits and investment-grade engineering appraisals for energy efficiency and small-scale renewable energy investments; cost-benefit analysis and estimated rates of return of potential investments to reduce energy costs and greenhouse gas emissions.

Strategic analysis of the company’s growth challenges in context of their inter-dependence on biodiversity and ecosystem services that are relevant to their business performance.

Cost-benefit analysis and estimated rates of return of potential investments that improve sustainable land use management and drive bottom line, such as: productivity upgrades, reducing input costs, certification of products and services.

Note: Available for projects in 26 IDB borrowing member countries throughout Latin America and the Caribbean

4 | DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT

LENDING PRODUCTS FOR SMALLER SCALE SUSTAINABLE INVESTMENT* Market-rate Loan Products

SHARED VALUE

GENDER

ENERGY EFFICIENCY SELF-SUPPLY RENEWABLES

BIODIVERSITY AND ECOSYSTEM SERVICES

Investments identified through grant-based advisory products can be financed through IDB.

Concessional Loan Products

CLIMATE The Canadian Climate Fund co-finances the IDB Group’s private sector climate projects that need concessional financing to be viable. Projects supported may include renewable energy, energy efficiency, agriculture and forestry greenhouse-gas emission reduction projects, as well as adaptation projects to reduce climate change vulnerabilities.

Donor Canadian Government ($250 million) Senior and Subordinated Loans and/or Guarantees

ENERGY EFFICIENCY AND SELF-SUPPLY RENEWABLES Multiple donor resources that can be blended alongside IDB financing to address funding needs in the currently underserved sector of energy efficiency and small-scale renewable energy generation, where borrowing companies often encounter high risk premiums, high collateral requirements and inadequate tenors.

Donor NDF ($10 million) CTF ($20 million) GEF ($10 million) Senior and Subordinated Loans and/or Guarantees

CLIMATE-SMART AGRICULTURE The Fund aims to improve productivity and profits for agribusinesses and their value chains while decreasing greenhouse gas emissions from land use and improving climate resilience. The Fund can lend directly to small projects or co-finance IDB loans. It finances private sector projects that require concessional loans or guarantees to be viable such as restoration of degraded lands, reforestation, improved agricultural management, certification of agricultural products and water efficiency investments.

Donor GEF ($5 million) Senior and Subordinated Loans and/or Guarantees

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 5

We see opportunity everywhere.

6 | DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT

Advisory Products SHARED VALUE APPRAISAL

Driving business growth through solutions that generate social value

A Shared Value Approach to Sustainable Tourism

A recent study of CEOs and top managers of large corporations, banks and institutional investors, conducted by the IDB shows how 85 percent strongly agree that companies can increase economic value by creating societal value.

Jamaica is one of the region’s top destinations for tourism, especially along the beaches of its northern coast. It is also a country with high rates of poverty and unemployment in its urban centers. When hotel developer Caribe Hospitality approached the IDB to finance a new LEED-certified hotel in the heart of Kingston, the IDB explored new ways to maximize the project’s value to the community and shareholders through a Shared Value Appraisal.

The IDB partners with clients to identify investments that simultaneously increase financial returns and deliver social impact. Through its Shared Value Appraisals, funded though grant-based resources, the IDB provides a diagnostic to identify investments, an in-depth costbenefit analysis to prioritize investment alternatives, and offers in-house specialists trained to prepare investment plans.

The IDB’s cost/benefit analysis identified several investment opportunities and helped prioritize two, namely women-led businesses and youth-at-risk. During construction, five young interns from disadvantaged backgrounds learned on-the-job training from the construction firm and were subsequently hired. Once opened in 2015, the hotel operator Marriott International will reduce procurement and operating costs within the first year by sourcing fresh goods from up to 20 local SMEs, primarily women-owned businesses.

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 7

GENDER APPRAISAL

When women thrive, businesses thrive Women are powerful consumers, controlling an estimated $20 trillion in global spending and making up to 80 percent of purchasing decisions. Yet women continue to have more difficulty than men in obtaining decent formal employment. Investing in women as qualified employees and powerful consumers can have significant positive returns for individual companies and for development.

The IDB works with clients to surface genderinclusive opportunities. Through grant-based tailored appraisals, the IDB helps clients to identify and leverage new business opportunities that increase gender equity and women’s economic empowerment.

The IDB Gender Lens Appraisal assists companies in assessing workforce and supply chain, comparing costs and benefits for the business and nearby communities of increasing female participation, and developing optimal business strategies for gender equity and inclusion.

ENERGY EFFICIENCY AND SELFSUPPLY RENEWABLES APPRAISAL

Surfacing investments to reduce costs and lower GHG emissions Amid increasing demand for energy in the region, energy efficiency has huge potential. Yet even for large companies, the high costs of project identification, high-risk premiums and often inadequate financing options are well-known barriers.

The IDB partners with donors, such as the Nordic Development Fund, Climate Investment Funds and the Global Environmental Facility, to provide companies with grant-based advisory services and financial instruments to overcome these barriers and invest in energy efficiency and self-supply renewable energy projects The IDB provides investment-grade engineering feasibility studies for energy efficiency and smallscale renewable energy projects, green building design and LEED certification.

Gender equity investments in the workplace in Mexico’s ports Fast-growing trade routes to Asia and the Pacific has been steadily rising in Mexico, stretching many port terminals to near capacity.

In western Mexico, the port of Manzanillo is taking the lead in exploring new ways to increase their capacity and competitiveness through a gender lens approach.

As part of a larger package to finance the expansion of Port of Manzanillo, the IDB is working with port authority APIMAN to provide an opportunity for women’s professional development in the workplace. In addition to reviewing the company’s certification in gender equity, the IDB helped the client to develop a sustainable talent recruitment and retention program to benefit men and women in a traditionally male-dominated industry.

8 | DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT

Lowering energy costs in Central America Peanut processor Cukra International is one of the largest employers in León, Nicaragua, employing up to 1,000 workers in its busiest season. It buys peanuts from 35 different growers, large and small, in the western part of the country, shelling tens of thousands of tons per year for export to Mexico and Europe.

Electricity is Cukra’s second biggest operating cost, after raw materials. During peak hours, it must shut down its plant to keep from paying even higher prices, resulting in inefficiencies. The IDB conducted an energy efficiency appraisal and found that by burning peanut shells as fuel and capturing the waste heat, Cukra could produce more than enough energy to cover its own needs.

BIODIVERSITY AND ECOSYSTEM SERVICES APPRAISAL

Making the business case for investing in nature Businesses depend on a wide range of services from the environment – known as ecosystem services – to operate. These include clean water supply, soil productivity, natural disaster mitigation, animal health, and many more.

Through its Ecosystem Services Appraisal, the IDB works with companies to identify which ecosystem services are most relevant to their business and how investments can maximize environmental and financial returns.

The IDB selects companies based upon a number of criteria: a demonstrated track record in sustainability, potential for improving impact on the environment, and willingness to integrate environmental capital analysis into decision-making.

A land with limits – Forging alliances in sustainable forestry Montes del Plata is a forestry company in Uruguay that grows, produces and exports eucalyptus pulp to major world markets. In a country where the cattle industry and asado culture dominate, access to a sustainable supply of forested land is the company’s largest business challenge. Montes del Plata must either purchase trees from other markets–often an unreliable and expensive endeavor–or find ways to share the land with the cattle industry.

As part of a larger financial package, the IDB conducted an Ecosystem Services Appraisal to demonstrate how investments in land-sharing techniques, such as shade and shelter provisions, could increase productivity by as much as 20 percent for cattle ranchers. This data-driven analysis will allow Montes to strengthen and expand its existing landsharing program, Alianzas, and ensure an inclusive and sustainable supply of forested land.

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 9

We make things happen.

10 | DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT

Market and Concessional Loan Products The IDB offers tailored long-term loans and risk mitigation products coupled with unique industry experience, market knowledge and mobilization of private capital to deliver financing packages that bring projects to fruition.

For select transactions, the IDB complements its own capital resources with blended financing in the form of concessional loan products to overcome traditional risk tolerance and cost barriers, making highly developmental projects viable.

CANADIAN CLIMATE FUND

Fast-tracking new investments in climate change mitigation and adaptation

First large-scale solar energy project in Chile

Long-term financing options that provide both high-risk tolerance and low costs are limited in today’s market. To remove these obstacles, flexible financial tools and innovation is needed.

The Atacama Desert in Chile has one of the highest levels of solar radiation on earth, making it an ideal place to harvest solar energy. As energy demands increase and electricity costs rise, Chile is taking steps to diversify its energy matrix. Solar energy investments through the private sector are a key component.

The Canadian government and the IDB partnered to launch the Canadian Climate Fund for the Private Sector in the Americas (C2F). This $250 million fund catalyzes private sector investments in climate change mitigation and adaption.

Through concessional loans, the C2F offers businesses senior or subordinated debt at below market rates to incentivize climate change investments in solar, wind, geothermal, biogas, agriculture and land use, and adaptation.

The IDB and the Canadian Climate Fund provided $41.4 million in long-term financing to Solarpak for Pozo Almonte and Calama, Chile’s first largescale solar photovoltaic project. In a country where the mining sector consumes 18 percent of Chile’s electricity and accounts for 19 percent of its GDP, the Pozo project is providing a renewable energy alternative to power this key industry. The three solar plants under the Pozo project boast a combined output capacity of 26.5 MW peak and are projected to reduce CO2 emissions by 56,000 mt/year.

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 11

ENERGY EFFICIENCY AND SELF-SUPPLY RENEWABLES Financing investments to reduce costs and lower GHG emissions The IDB, together with donors’ resources, finances energy efficiency and renewable energy projects that require concessional loans or guarantees to be viable, addressing funding needs in the currently underserved sector of energy efficiency and smallscale renewable energy generation, where borrowing companies often encounter high risk premiums, high collateral requirements and inadequate tenors.

Combining up to US$10 million in financing from IDB with donor financed subordinated loans or credit enhancements offering first loss protection, results in a blended instrument to raise a borrower’s credit profile and reduce the price of loans; thus, making make more projects financially viable.

Largest rooftop photovoltaic system in Central America In the past year, the IDB has conducted more than 30 investment-grade energy efficiency appraisals and feasibility studies across a range of sectors, from shrimp farming to clothing manufacturing to dairy operations.

The case of bottling company Grupo Corinsa in San Pedro Sula, Honduras is emblematic.

Electricity is not only expensive but energy price fluctuations make it difficult for businesses.

The IDB first conducted an investment-grade energy appraisal, and then provided concessional financing for a $10 million project, supported by NDF credit enhancements. This resulted in the construction of the largest rooftop photovoltaic system in Central America.

Best energy efficiency project of the year in Brazil With electricity prices projected to increase 5.7 percent in 2015 in Brazil, reducing energy costs should be a priority for many companies. Yet businesses still face many financial barriers for its widespread adoption.

Contax, a midsized customer service company in Brazil, had been saddled with monthly fines because it could not meet for CO2 reductions. APS Soluçoes, a small energy service company, could offer savings through energy efficiency, but lacked access to short-term financing. The IDB tapped into donor resources from the GEF and provided APS with a letter of guarantee for 80 percent of total costs, allowing Banco Indusval to finance APS. In 2014, this project won the Brazilian Qualiesco Award, for best energy efficiency project of the year.

12 | DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT

CLIMATE-SMART AGRICULTURE FUND

First fund to focus on climate-smart investments in agriculture Climate change is impacting agricultural yields across the globe. Rising temperatures and increasingly erratic precipitation patterns are affecting how producers adapt to these changing conditions.

In Latin America, agriculture accounts for on average 10 percent of GDP. As a key player in ensuring local and global food security, the region needs to take new measures to adapt and continue growth.

The IDB partnered with donors to establish the Climate-Smart Agriculture Fund for Latin America and the Caribbean to catalyze greater private sector investments in sustainable agriculture, forestry and rangeland systems in the face of climate change.

The first to focus on climate-smart investments in agriculture, this fund aims to improve productivity and profits for agribusiness companies and their value chains while improving adaptation measures and resiliency as well as decreasing greenhouse gas emissions from land use. Investments can be priced at concessional rates, have longer tenors or distinct repayment profiles thus offering financial incentives for this type of investments not available in the market.

Protecting biodiversity in Brazilian forestry project Klabin is Brazil’s largest paper producer with 15 industrial plants, 15,000 direct and indirect employees, and 70 export destinations. Its products are visible in people’s everyday lives – from the cardboard packaging that protects food and beverages, to the raw materials that make baby diapers, and much more.

A pioneer in forest stewardship and sustainability, Klabin recently launched the Puma Project to double its size within three years. The IDB will provide a US$300 million A/B loan to finance this greenfield project, considered the state of Paraná’s largest private investment. The cutting edge pulp & paper mill will be self-sufficient in electricity, through a biomass facility that will sell 56% of energy surplus to the national grid.

Connecting Klabin’s forests to the new mill without impacting biodiversity was a key challenge, especially considering the large number of pumas, capivaras and other large fauna crossing the roadways to be built. The IDB’s Climate-Smart Agriculture Fund will provide US$310,000 to build underground passageways following best practices used in Europe and North America to improve habitat connectivity on an estimated area of influence of 5,000 hectares.

DRIVING SUSTAINABLE BUSINESS PERFORMANCE MOVING THE NEEDLE ON GREEN GROWTH AND SOCIAL IMPACT | 13

Our deal is with the future.

Private Sector with Purpose: As the principal development lender in Latin America and the Caribbean, the Inter-American Development Bank (IDB) works with the private sector to achieve breakthrough financial and development results.

The Structured and Corporate Finance Department leads IDB’s private sector operations for large and midsized businesses in renewable energy, infrastructure, agribusiness, industry, financial markets, healthcare and education.

Contact us: sustainablesolutions@iadb.org; www.iadb.org/scf