Dutch development finance institution FMO plans to provide a $20 million subordinated facility to Ecuadorian lender Banco de la Producción SA (Produbanco) to strengthen its capital base and support financing for renewable energy, energy efficiency, and other eligible green projects.
Under the proposed transaction seen by CrowdFund Insider, FMO will commit $10 million as the A-lender and mobilise another $10 million through Finance in Motion’s Eco-Business Fund I, whose participation will be structured as B-participation in the same facility.
The subordinated financing will count towards Produbanco’s Tier 2 capital, helping strengthen its balance sheet while expanding its capacity to finance eligible green investments across different sectors and client segments, including small and medium-sized enterprises (SMEs) and corporates.
Produbanco is a universal bank and the fourth-largest lender in Ecuador, with total assets of $9.5 billion. It is a subsidiary of Promerica Financial Corporation, a long-standing client of FMO, and serves retail, SME and corporate customers.
The bank has an established sustainable finance business, including lending for green projects and initiatives supporting private sector development.
FMO said the investment aims to support climate mitigation and adaptation activities, in line with its methodology for determining green finance attribution.
Eligible uses of proceeds include renewable energy and energy-efficiency investments across various sectors.
The transaction is also intended to support Produbanco’s sustainable finance strategy and strengthen its ability to lend to SMEs, which play an important role in Ecuador’s employment generation and economic activity.
The investment contributes to the United Nations Sustainable Development Goal 13 on climate action.
FMO has classified Produbanco as Category A under its Sustainability Policy, reflecting the bank’s sizeable corporate portfolio and exposure to sectors that could pose significant environmental and social risks.
These sectors include agriculture, aquaculture, forestry, industrial manufacturing, power, and mining and quarrying.
Potential risks include soil, air and water pollution, land conversion, biodiversity loss, poor labour conditions, effects on vulnerable communities, and supply-chain and resource-efficiency issues.
Produbanco manages these risks through an established Environmental and Social Management System overseen by a dedicated team of environmental and social professionals.
Under the proposed facility, the bank must continue applying the European Development Finance Institutions’ Exclusion List, relevant Ecuadorian environmental and social laws and regulations, and the International Finance Corporation’s Performance Standards to applicable transactions.
