Project Details
Project
Smart Luz Sustainability Bond Framework Second-Party Opinion (2021)
Client
Smart Luz Concessionária de Iluminação Pública SPE S.A.
Project Type
Sustainability Bond/Loan
Industry Group
Municipality
Use of Proceeds
Energy efficiency; Climate change adaptation; Affordable basic infrastructure; Access to essential services;
Location
Brazil
Evaluation Date
Jul 2021
Evaluation Summary
Sustainalytics is of the opinion that the Smart Luz Sustainability Bond Framework is credible and impactful and aligns with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, and Social Bond Principles 2021. This assessment is based on the following:
USE OF PROCEEDS
The activities defined under the use of proceeds – Modernization and Improvement of Rio de Janeiro’s Public Lighting System and Related Services – are aligned with categories recognized by both the Green Bond Principles and/or Social Bond Principles, namely Energy Efficiency, Climate Change Adaptation, Affordable Basic Infrastructure, and Access to Essential Services. Sustainalytics considers that activities in the eligible category will lead to positive environmental or social impacts and advance the UN Sustainable Development Goals (“SDGs”), specifically SDGs 7, 9, and 11.
PROJECT EVALUATION / SELECTION
Smart Luz’s Lenders’ Independent Engineer and Bond guarantor were responsible for the due diligence and review of the construction costs and capital expenditure schedule associated with the pre-identified Eligible Activities to be financed per the criteria defined under the Framework. Sustainalytics considers the project selection process in line with market practice.
MANAGEMENT OF PROCEEDS
Smart Luz’s management team will be responsible for the allocation of bond proceeds. In addition, Smart Luz’s Controller will be responsible for overseeing internal controls including the execution of payments and managing fiscal compliance and accounting records. Smart Luz will hold the unallocated proceeds in an escrow account until full allocation. This is in line with market practice.
REPORTING
Smart Luz intends to publish Sustainability Report(s) on its website to report on the allocation and the impact of proceeds on an annual basis until full allocation. The allocation reporting is expected to include externally verified project-level details on the allocation of net proceeds, the balance of unallocated proceeds, along with semi-annual progress on the achievement of Eligible Activities, including comparison of actual physical-financial performance compared to contractual milestones. In addition, Smart Luz intends to report on relevant quantitative impact where feasible and has provided indicative metrics within the Framework. Sustainalytics views Smart Luz’s allocation and impact reporting as aligned with market practice.