BDMG is a subnational development bank supporting sustainable development in Minas Gerais and neighboring states in Brazil. Founded in 1962, BDMG supports the public and private sectors, providing credit to companies of all sizes and sectors, municipalities and municipal public service concessionaires. The commitments assumed by BDMG are in line with the 2030 Agenda, in the pursuit of objectives and goals for sustainable development (SDGs).
BDMG has been working on the promotion of SDGs, allocating a significant amount of funds to projects that align with these objectives. In 2020, for instance, 57% of total financial disbursements were intended for SDG-aligned operations. Put into specific cities climate finance activities, we could exemplify:
- Financing provider to cities in Minas Gerais in Brazil: supporting local governments facing barriers to financing for their climate-smart projects like renewable energy, energy efficiency, sustainable management of water resources and access to safe water and sanitation. It includes offering special conditions in terms of interest rates for the most vulnerable municipalities in the State.
- Structuring public projects in partnership with the private sector: while an increasing number of cities are developing sustainable action plans, they often lack critical resources and capacity to advance such projects from an idea to a robust business case. BDMG Facility seeks to address this shortfall by providing the technical assistance to local leaders in prioritizing and preparing climate-smart projects at an early stage, with the goal of enhancing quality, and ensuring they are bankable.
- Financial products to support enterprises with climate action projects such as those related to renewable energy and energy efficiency: in 2021 (up to September), BDMG disbursed BRL 124.6 million located in 27 municipalities, around 70 % of which in low HDI regions. It means 66,3 GWh/year electricity produced in new plants and more than 4.700 tCO2e/ year of emissions avoided.
Established in the 1960s, BDMG has served as an important financial asset for the Brazilian state and a model subnational development bank for the country and the rest of Latin America in recent years. Through a complex portfolio of credit lines, technical assistance initiatives, project preparation, and equity investments, BDMG has reliably invested in public and private economic development projects, supported sustainable development goals, and promoted innovation throughout the region. Recently, BDMG has paved the way for green sustainability and a post-pandemic economic recovery and has reimagined the role of subnational development banks. It has created a legacy beyond economic recovery for Minas Gerais, which have become lessons that can be applied to development banks in general.
Ultimately, along with knowledge of local terrain and infrastructure needs, regional development banks such as BDMG are important financial institutions with the capability to target sustainability concerns and questions about post-pandemic economic recovery, supplementing the role that the federal government and national agencies play in the country.
In this sense, we would like to share some publications and actual examples of BDMG’s sustainable investments that could help other Alliance members to learn more about our work.
- recently published article about BDMG at the Harvard Review of Latin America
- research paper released for the occasion of the AFD International Research Conference highlighting the nature of Subnational Development Banks (SDBs) in the context of sustainable finance and how they operate within development networks
The topic of climate finance is particularly important to BDMG. In this sense, we believe the Alliance could be an important channel to provide information and exchange knowledge among all relevant actors dedicated to climate finance.
In addition, another international opportunity for climate finance is the recent founding of an international Alianza de Desarollo between sustainable development banks in Latin America and their institutional and financial partners. It aims to strengthen the capacity of SDBs to broaden and improve their services offered to local governments and stakeholders as well as consolidate portfolios of local projects to finance just local urban and territorial transitions. This alliance represents the second international initiative of regional development banks forming coalitions to promote their goals, and BDMG has one of the leading roles in this recent partnership.
Finally, as president of the Brazilian Development Association (ABDE) and vice President of the Latin American Association of Development Finance Institutions (ALIDE), I (Sergio) and BDMG team have been participating in several discussions and forums on climate finance. This last month, just to give an example, I (Sergio) partook as speaker at the High-Level Conference on Local Infrastructure Investment, in Genoa, where we had relevant discussions among representatives of local administrative entities from G20 countries, International Organizations and Multilateral Development Banks, that can contribute to building more sustainable and inclusive quality local infrastructure.
We hope the Alliance will facilitate the coordination of activities such as training, peer to peer exchanges, and cooperation with partners. We also expect to mobilize development banks in the region and other partners to establish new initiatives, synchronously meet 2030 Sustainable Development goals, and create a space for discussions around development in the region.
It is definitely a great opportunity to develop common instruments such as reporting instruments and project preparation frameworks as well as exchange knowledge about technical assistance to support the development of pipelines of projects.
As a subnational development bank, BDMG can bring the view of these institutions to unlock and broaden the sources of public and private funding at the local level. We believe SDBs are key stakeholders to bridge the financial gap and address the systemic failure of subnational financial markets. We can amplify the reach and effectiveness of development networks by serving as the last-mile specialist on the ground, identifying opportunities and connecting local actors to global sustainable development-oriented funds. Because we are closer to the clients, we are in a better position to finance municipalities as well as small and medium size enterprises.