São Paulo, Brazil, July 22, 2022—A new investment will help increase access to sewage collection services and improve water quality in the state of São Paulo while boosting the water sector's competitiveness and promoting inclusive growth in Brazil.
IFC is providing a loan of $150 million to Companhia de Saneamento Básico do Estado de São Paulo (SABESP), one of the largest water and sanitation (W&S) companies in the world. The loan will be used to finance investments that focus on improving water quality and expanding sewage collection and treatment in the poorest neighborhoods of São Paulo, as part of the Pinheiros River Clean-Up Program. In addition, IFC and SABESP will work on issuing the first pureplay blue loan in Latin America, with the proceeds to be used for investments that protect the ocean, natural water resources, and urban water bodies.
IFC will support SABESP through the Utilities for Climate (U4C) initiative, which combines advisory and investment to help water utilities tackle their most pressing needs and establish stronger, long-term relationships. The U4C initiative also aims to encourage knowledge sharing among companies in emerging markets facing similar issues, learning from each other's experiences and showcasing innovative solutions. In the case of SABESP, the company requested IFC's support in conducting a diagnostic of the Non-Revenue Water Reduction Action Plan.
Improving access to W&S is critical to achieving Brazil's inclusion goals. Due to underinvestment, the country has significant gaps in access to essential services—with 50.8 percent coverage for sewage treatment and 84.1 percent for potable water. To achieve its targets for universal W&S services by 2033, the country's investment needs are estimated at BRL 750 billion (equivalent to approximately $156 billion), according to the Brazilian Association of Private Concessionaires of Public Water and Sewage Services (ABCON) and KPMG. Private sector support is key to achieving these objectives.
"SABESP is the company that invests the most in sanitation in Brazil, with one third of the resources applied in the sector. While we seek to diversify the sources of our investments, IFC's financing—with an unprecedented blue loan issuance—reinforces our ability to make investments to improve people's lives and ensure positive impacts on the environment," said Benedito Braga, SABESP's CEO.
"As one of the largest W&S companies in the world, SABESP is a strategic partner for IFC in its efforts to improve access and quality of service in the water and sanitation sector. IFC's long-term local currency financing is the first Blue Loan issuance in the W&S sector in Brazil. The financing will help SABESP increase operational efficiency and build climate resilience," said Adil Marghub, IFC Head of Infrastructure and Energy for Latin America and the Caribbean.
"Water and sanitation are one of IFC's priorities in Brazil, and our investment in SABESP is expected to have a major development impact in an essential infrastructure space. IFC's support will also further signal market confidence in the sector, which is vital for public health, poverty reduction, and Brazil's future economic resilience," said Carlos Leiria Pinto, IFC's Country Manager in Brazil.
IFC's investment will support 11 projects across four investment programs. Two of these programs, the Pinheiros River Clean-up and the Sanitation Improvements in Coastal Areas, will focus on sewage network construction, network interconnections and connection of households, and social work with local communities. The other two programs, Water Supply Infrastructure in the Coastal Area and Water Supply Infrastructure in the Metropolitan Area, will focus on providing water distribution flexibility and increasing water security.
This investment is IFC's first financing to SABESP, and represents the third project under the U4C initiative, following IFC's debt investments in Companhia Riograndense de Saneamento (Brazil) and Izmir Water and Sewerage Administration (Turkey).
With this project, IFC aims to tackle the development challenges in the Latin America and the Caribbean region by supporting sustainable growth and reducing infrastructure gaps. IFC has been investing in Brazil's private sector since 1957, helping the country boost inclusive growth, innovation, and employment.
SABESP is a mixed capital company, founded in 1973. SABESP is the largest water and sewage company in Latin America, based on the number of clients and net revenues. The company provides water and sewage services directly and on a wholesale basis to a broad range of residential, commercial, industrial and public customers in 375 of the 645 municipalities in the State of São Paulo, including the city of São Paulo, the biggest city in Brazil.
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2021, IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic. For more information, visit www.ifc.org.