Green Finance, Basis for Mexico's Sustainable Development

Q: What were the deciding factors for the Carbon Trust to establish an office in Mexico?

A: The Carbon Trust has been delivering projects in Mexico since 2011, but did not establish a subsidiary in Mexico City until 2014. Mexico City is considered the headquarters for Latin America, except for Brazil, where we have a presence as well. Mexico is important because of its resilient economy and because it has one of the largest climate change impacts in terms of carbon emissions, compared to other countries in the region. The Carbon Trust wanted to increase its impact across the region to help deliver our mission: to accelerate the move to a sustainable, low-carbon future. Since 2014, the company has worked extensively with public and private sector clients. These include the Mexican federal government and other leading institutions, like the National Institute of Ecology and Climate Change and the Mexican Innovation Centers for Clean Energy. Other public sector clients include state governments and municipalities. In the private sector, the company has worked closely with the Mexican Stock Exchange on issues like green finance and carbon markets, and with international financial institutions, including multilateral, regional and national development banks. These include the World Bank, the Inter-American Development Bank, the IFC, and other climate finance donors and corporate entities.

Recently, we have introduced verification and assurance services to help companies measure, manage, reduce and communicate carbon, water and waste performance.  To achieve this, we continuously collaborate with our UK office. The company has a global team of more than 200 sustainability experts, including engineers, financiers and policy specialists, and almost two decades of experience in the climate change sector.

Q: How did green finance emerge as a trend and what is the company’s role in promoting its benefits?

A: Green finance has been a key area of Carbon Trust activity in Mexico. Green bonds are relatively young – the first was issued in 2008 by the World Bank. This set the example for how bonds should be evaluated to be considered ’green’. The emergence of green bonds demonstrated the appetite for green financial instruments. Nevertheless, as the market grew, so has the fear of ’greenwashing’, which happens when organizations say a practice is environmentally friendly but in reality, this claim is not supported by the evidence. Therefore, the Carbon Trust has been interested in pushing the bar higher through its technical advice, ensuring that best practice is taken into account when evaluating green financial instruments. We have a green finance team, which has been working in four main areas, including green bonds and loans. We also help companies set green metrics and targets, as well as working with clients on climate risks and opportunities. Additionally, the team advises on the development of green financial products for banks and other lenders, such as governments. We are certain that green finance is necessary to de-carbonize the economy because it triggers and transforms many sectors through sustainable and climate-resilient infrastructure. This helps developing countries to grow in a more socially and environmentally friendly way.

Q: How are companies in Mexico assessing their environmental targets compared to other parts of the world?

A: Companies in Mexico and the rest of Latin America are lagging behind in terms of how they structure their targets related to environmental performance. That is part of the challenge for Carbon Trust Mexico. In general, we support companies on their journey to becoming more sustainable, with a focus on trying to help them transition to net zero economies. We support them by measuring and analyzing all aspects of their carbon and environmental impact, including organizational, product and value-chain footprints. We try to help them reduce their impacts every year with the different standards we offer. We attempt to get companies to look at longer-term environmental targets, by helping them to align their carbon trajectories with the Paris Agreement, looking to stay below a 2°C temperature increase, or 1.5° if possible.

Q: How can Mexico find the balance between economic growth and sustainability?

A: Fortunately, sustainable growth does not require a tradeoff between economic benefits and environmental performance. When companies integrate energy efficiency measures, for instance, they also reduce operational costs as they become more efficient. There is now more consciousness about companies’ environmental impact, which means consumers all over the world, including those in Mexico, care about whether a company pollutes or not. Companies can capitalize on the benefits if they are aware of them and we can help them achieve this.

Q: How does the company assess the practices of fossil fuel companies that are starting to invest in renewable energy?

A: We have seen how these companies have changed their strategies, as some have realized that they have stranded assets within their portfolios and operations. Therefore, they have been increasingly moving parts of their business toward renewable energy and the Carbon Trust is aware of this. Through instruments such as green bonds, we have been trying to encourage companies to look at their investment portfolios and try to make them greener. This will help companies adapt to the conditions that will be prevalent in the future. Fossil fuel companies are more aware than ever about how they will be impacted if they do not change their core business.

Q: What are the company’s goals for the future?

A: As Carbon Trust Mexico continues expanding its services across the region, it would like to see the implementation of large-scale, multi-year programs to support different sectors achieve net zero goals. Our aim is to increase our services for Latin American companies and we expect to improve our market penetration for green financial services, as well as on electromobility, sustainable agriculture and smart energy systems. Furthermore, the company is establishing new service areas working with governments to develop green stimulus packages to tackle present and emerging challenges, including the Covid-19 pandemic. We believe it is a moment not only for economic recovery but for a transformation of future development. We need to take the environment into account if we are to make a fresh start and address climate change, which is likely to pose an even bigger risk than the current pandemic.

The Carbon Trust aims to accelerate the transition to a sustainable low carbon economy. The company was established in 2001 and operates globally. In Mexico, it helps companies and governments reduce their carbon footprint and provides expert guidance and support on areas such as climate and energy policy, green finance, sustainable agriculture, carbon markets and electromobility.