Blackrock’s Sustainable Mexican ETF Shows Rapid Success

Blackrock reported this Tuesday that its Mexican local currency sustainable exchange-traded fund (ETF), the first of its kind, has been a success. The ETF is experiencing some of the fastest growth seen worldwide as it collected US$450 million during its first two months, reported Reuters. The fund proves growing demand for so-called Green Finance, of which companies in the renewable energy value chain could benefit.

The iShares ESG MSCI Mexico ETF is centered on Mexican companies with an approach toward issues regarding the environment, governance or social issues. Armando Senra, head of iShares Americas, agrees this marks a growing need for sustainable investment options. “The whole process of building this product in Mexico was working with MSCI and the retirement fund administrators to be able to introduce investment in ESG),” he said in an interview with Reuters. The ETF was launched on July 29 and received permission to receive investment from retirement fund administrators, called Afores in the Mexican context, in August.

“In our role as an institutional investor, it is encouraging to have better investment vehicles that facilitate the adoption of ESG criteria,” said Antonio Sibaja, Executive Director of Investment Strategies at retirement fund administrator Profuturo, to Reuters. The need to invest in sustainable projects follows a wider market trend, said Roberto Ballinez, Senior Executive Director of Public Finances/Infrastructure at HR Ratings in a recent interview with MBN. “It is important to mention there is a demand for green, social and sustainable bonds in the Mexican debt market. Every time a bond is issued, there is an overdemand on a scale of 1:3. This is a very good signal for the growth of the market, regardless of the slowdown seen in 2019-20. We can therefore be very hopeful for the future of green, social and sustainable bonds in Mexico,” said Ballinez. He also notes that in Mexico, the private sector dominates in issuing sustainable bonds, where ideally the government or development banks should take on such risks.

Rodrigo Osorio, General Director of the Agency of Energy of Puebla, sees the benefits of finance’s growing attention toward sustainability. “The financial sector is among those that have provided the most interesting innovations for environmental protection. From the issuing of green bonds to the expansion of carbon markets, sustainable finance has emerged as a mechanism that can direct capital toward projects that comply with stricter measures to protect biodiversity and reduce greenhouse gases,” he wrote in his latest Expert Opinion for MBN.