Project Details
Project
Raízen Sustainability-Linked Finance Framework Second-Party Opinion 2022
Client
Raízen Energia
Project Type
Sustainability Linked Bond or Note; Transition;
Industry Group
-
Use of Proceeds
-
Location
Brazil
Evaluation Date
May 2022
Evaluation Summary
Sustainability-Linked Bond Principles 2020, Sustainability-Linked Loan Principles 2021
Sustainalytics is of the opinion that the Raízen Sustainability-Linked Finance Framework aligns with the Sustainability-Linked Bond Principles 2020 and the Sustainability-Linked Loan Principles 2021.
Selection of Key Performance Indicators (KPIs)
Sustainalytics considers KPI 1 to be adequate given it: (i) indirectly measures Raízen’s performance linked to material sustainability issues, (ii) represents a material sustainability topic for the Company and industry, (iii) follows a clear and consistent methodology. Sustainalytics considers KPI 2 to be strong given that: (i) it measures performance on a relevant and material issue of the Company and industry, (ii) it is a direct measure of operational performance, and (iii) follows a clear and consistent methodology.
Calibration of Sustainability Performance Targets (SPTs)
Sustainalytics considers the SPTs to align with Raízen’s sustainability strategy and considers Raízen’s SPT 1 to be ambitious given that it is aligned with past performance and sets targets exceeding those of the subindustry peers. Sustainalytics considers Raízen’s SPT 2 to be ambitious given that it exceeds past performance and exceeds those of the subindustry peers.
Bond and/or Loan Characteristics
Raízen has disclosed that the financial characteristics of the sustainability-linked debt instruments issued under the Framework will be linked to the achievement of the SPTs. The success or failure to achieve the SPTs on the relevant target observation dates will trigger a step-down or step-up margin or margin adjustment, as applicable, payable as per the transaction documentation. In addition to the achievement of the SPTs, the structural adjustments will be triggered if: i) the verification of the SPT has not been provided and made public by the time of the notification date, as defined in the instrument documentation; or ii) the Company fails to provide satisfaction notice as of the notification date related to achieving the SPT. Sustainalytics considers these levels of disclosure to be aligned with the Sustainability-Linked Principles, noting that it does not opine on the adequacy of the magnitude of the financial penalty.
Reporting
Raízen commits to report on an annual basis on its progress on the KPIs against the relevant SPTs and expects to include the relevant figures in its Corporate Sustainability Report or other similar report. This reporting will be available on its website and is aligned with the SLBP and SLLP. Raízen further commits to disclose annually, when feasible, qualitative or quantitative explanations on the contribution of the main factors to the evolution of the KPI progress, positive sustainability impacts of the performance improvement, as well as any re-assessments or adjustments of the KPIs, their baselines or scopes.
Verification
Raízen communicated to Sustainalytics that it commits to having an external verifier provide a limited assurance report with relevant expertise on the performance level against each SPT for each KPI. The verification will be done annually and at any relevant date for assessing the SPT performance leading to a potential adjustment in the sustainability-linked instruments and will be made available on its website, which is aligned with the SLBP and SLLP on verification.
Climate Transition Finance Handbook
Sustainalytics has evaluated Raízen’s transition governance, strategy, decarbonization targets and intentions to report on transition progress, and finds Raízen to be partially aligned with the recommendations of the Climate Transition Finance Handbook 2020. Raízen has adopted medium-term targets for its biofuel operations and is currently working on developing its long-term climate strategy. However, Sustainalytics notes that Raízen has not developed targets related to its fossil fuel distribution operations.